Do you mean participial phrases, i.e. modifiers that start with a verb form? If so, they are used to modify nouns. A participle is a verb form (usually -ing or past tense) used as an adjective, and adjectives are used to modify nouns.

Hello Bill,

Thanks for the reply. It seems that some present participle phrases can act as verb modifiers as well. How do we differentiate between the two. I am asking this because the noun modifier has to be right next to the noun, which creates confusion if the modifier is modifying both the subject and the verb.
2. So as a rule are past participle phrases only used to modify noun and noun phrases.
3. I have the same query with prepositional phrases, they can act as both noun and verb modifier. How do we know when to differentiate.

R.S

Can you give me an example of a sentence using a present participle to modify a verb? I'm drawing a blank; all of the GMAT-related questions I can think of use them to modify nouns.

As for prepositional phrases, if it modifies a verb, it answers one of the following questions: how? where? when? why? For example:

He went to the baseball game.

The prepositional phrase there answers the question "where?", so we know it modifies the verb "went."