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There are 2 modulative shadow techniques; stencil-based (See section 7.1 Stencil Shadows : SHADOWTYPE_STENCIL_MODULATIVE) and texture-based (See section 7.2 Texture-based Shadows : SHADOWTYPE_TEXTURE_MODULATIVE). Modulative shadows are an inaccurate lighting model, since they darken the areas of shadow uniformly, irrespective of the amount of light which would have fallen on the shadow area anyway. However, they can give fairly attractive results for a much lower overhead than more 'correct' methods like 7.4 Additive Light Masking, and they also combine well with pre-baked static lighting (such as precalculated lightmaps), which additive lighting does not. The main thing to consider is that using multiple light sources can result in overly dark shadows (where shadows overlap, which intuitively looks right in fact, but it's not physically correct) and artefacts when using stencil shadows (See section The Silhouette Edge).