Cloth FX: Cloth Deformer
The Cloth Deformer is part of the Cloth FX suite in X-Particles. It must be present as a child object of the object which is to be treated as cloth.
However, this object has no settings that can be changed by the user.
The deformer is not required for Cloth FX to function but is recommended when the cloth object is a parametric object, such as the Plane object. With many such objects you can change the number of segments during the animation, which will change the number of vertices, and the Cloth Deformer will handle this correctly, keeping everything procedural. This can't be done with an editable object, so the deformer is not required.
Even if the deformer is not actually required you can still add it manually if you want to use its falloff capabilities. This allows you to restrict the cloth effects to particles within th deformer's field of effect.
In this example the 'Simulate' menu in the Cloth Tag is set to 'Falloff Inside Only' and you can see that the only vertices taking part in the simulation are those within the falloff's field of effect: