The BugCrusher is an Analogue Sample Rate Reducer - a Sample & Hold circuit run at audio rates - which produces aliasing effects on your signal.
 
With the Rate set high this imparts a clear fizzle & crunch, while at low rates any high frequencies will seem to wrap-around in an effect somewhat akin to a clean ring-mod.
 
Despite the name, the BugCrusher is not an actual BitCrusher - most BitCrusher effects will have Sample Rate (x-axis quantization) and Bit Depth (y-axis quantization) and are typically digital in nature.
 
Tom Bugs, the creator, says "Back when I was making BugCrushers, they were well liked for processing synths & drum machines, but the effect also has found favour with bassists as the low frequencies can pass through cleanly while the highs are crunched".