sits on top of the distributor and locks in the ignition timing, IIRC i dont have a distributor in my car so im not 100% sure.
The distributor is an electrical device that distributes voltage to the spark plugs of a gasoline engine in the order of the firing sequence. The cap just covers and protects it. I actually just had to replace mine because there was a crack in it and moisture was getting inside and keeping the car from starting. After blow drying the distributor cap for about 10 minutes, it dried the air enough for me to get my car started so that I could drive it to my mechanic to get the cap replaced.