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This has been somewhat discussed/talked about in other threads. I'll try to find that when I get some time, but generally, the "adjust" option is going to consider the "missing" AB's or IP as being somewhere near league average and the "make bad" setting is going to consider the missing AB's or IP as being somewhere around replacement level.
The "missing" AB's or IP being the difference between the real life number and the number you have set for those adjustments. So, you have "adjust" at 130 and the player had 120 at-bats it is basically adding 10 "average" at-bats to their real life totals to come up with their ratings.
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