Here's my post on another forum about this:
Basically just a felt disc, with very specific cutouts so that the open portions of the driver are still open, and the magnet/steel portions are covered (bonded by double-sided tape). The intention is to damp away backwaves from the face when wearing the headphones. Subjectively the upper midrange gets a lot "clearer" sounding with this.
I got the idea to do this when I just did the whole foam disc thing on the driver, initially to tame the treble slightly, but it only partially tamed it and ended up sounding tizzy. At the same time though I noticed a completely separate effect - that the midrange sounded clearer and more open - which did not make much sense as I was covering up the drivers with the fabric, but it came to light that it could be reverberation-related, so I arrived at this.
Interestingly, the wooliness of the bass sounds quite diminished by this too. Not completely gone, at least not when A/Bed against my HE400. But it is a noticible improvement compared to before. The specific segment I test this with is the beginning section of 'If I Were You' by K.D. Lang. In my other usual bassy test tracks that improvement does propagate too.
Frequency response doesn't seem to be changed. It has its effect on overall clarity, by getting rid of backwave reverberations introduced between the face and the driver grill surfaces. Definitely not a massive retuning ala the Jergpad mod, but it's a stronger improvement than the regrilling mod.
Thanks for the details. Are you using a custom grill (like the one in the regrilling thread; the pencil holder, I believe), or the stock grill? Also, can you be more specific about the material you used. Thanks.