At first, you must set the distort map. It's rows number must be same than cols number, otherwise it doesn't work. The displacement points are indexed from 0 to the number of rows/columns. So when you distort a sprite, you usually want to loop it with nested for:
[code:3dlyxans]System: 3 For "x" from 0 to 10
System: 3 For "y" from 0 to 10[/code:3dlyxans]
Use the LoopIndex in loop to set the displace point you want to distort. The x and y displaces mean the amount of pixels you want to move the point.
Try to do something simple at first, for example, applying a constant value to x and y displaces and see the object changing it's position.
The collision mask doesn't update with it, though :I