This modifier can be used with both standard particles and liquid particles. The main function is to make it possible to switch between the two particle types and to change the properties of liquified particles during the simulation.
There is also the option to adjust the properties of liquid particles at any time via their custom properties. Math or Data Mapper Mmodifiers can also be used for this purpose, for example. You can find out which of the liquid custom properties are available in the section on particle simulation settings.

In general, it should be noted that the order of all particle modifiers in the Object Manager can make a difference, as the modifiers are evaluated from top to bottom. The following illustration demonstrates this with two Simulation Scenes that use identical settings and objects, but are sorted differently.

The upper Simulation Scene contains a Basic Emitter that generates green particles. The Liquify Modifier was grouped there before the emitter. In the second simulation scene, the Liquify Modifier lies within the Particle Group that is evaluated after the emitter. Reddish particles are created there. It can be clearly seen that the continuity of the green particles is confused by the early classification of the Liquify Modifier and appears to be staggered. Therefore, make sure to place Liquify in the respective Particle Group or in the Object Manager list below and after the emitter.