Modulated reverb is a reverb effect seasoned with some (any) form of modulation. The beautiful thing about modulated reverb is that no modulation occurs on your original guitar signal, but instead the reverb decay/ echo is laced with a modulation of some sort. This gives the reverb decay a feel of movement and life.

What is a modulation effect?

Modulation effects are a particular category of audio effect (FX). These are effects which modify the sound in a certain way: by adding a time-delayed version of the sound to itself, and then varying the size of that delay over time.

What is the best reverb settings?

Move the pre-delay to about 30-40% or so as a starting point and see how it sounds. With your EQ, maybe set the high-pass around 200Hz and the low-pass at about 12kHz. In a situation like this, you may want to have more body in the reverb. The following example shows a dual-reverb setup.