I'm not really sure how it works.
Theoretically it should hide the existance of all the user's posts to anyone except mods/supermods/admin.
I do know that if the coventried user posts in a forum a moderator handles, it will show up as "The administrator has decided this member should be quiet for a while" and there is a link to view the post. This shows up for supermods and admins everywhere.
I'm not sure how search and forumdisplay and all that handles it though.
Best idea is just to put someone in coventry, then view a forum and thread they've posted in. Then logout and do the same to see what logged out and non-staff members see.
You could also ask how it works over at vbulletin.com
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