It's kind of challenging to find a description of wave folding, which might be part of the reason that it doesn't get marketed in standalone keyboard synths.
My understanding, which may be incomplete, is that the gain is increased, but instead of the wave being clipped at its maximum (which would sound like distortion), the wave is "folded" back to the other side (that is: if the positive part of the cycle would clip, that "excess" part is instead subtracted). This increases the harmonics in the waveform, with a common analogy being that of a "reverse filter."
When applied to a sine or triangle wave, wave folding allows for some nice smooth timbres that are difficult to get from filtering simple waves. You can send more complex waves to the wave folder, of course; but I don't usually find the resulting chaos quite as interesting.
Since wave folding is sort of a "secret sauce" in terms of its process, different wave folders vary in their tone as much as different filters do. Like filters, you sort of have to listen to them.
The reason that I bought the WMD Ultrafold was that much of its folding range reminds me of stepping through the Evolver's digital waveforms: waves that are pleasant, but that can't be derived from the usual saw/triangle/pulse. Except with the benefit that these are analog, and don't have any problems with aliasing. Plus you can slowly morph through them with modulation, which just kicks ass.