These effects are a combination of RESONANCE and INDUCTIVE effects 
The effects are also important in other reactions and properties (e.g. acidity of the substituted benzoic acids).

Here are some general pointers for recognising the substituent effects:

• The H atom is the standard and is regarded as having no effect.

• Activating groups increase the rate

• Deactivating groups decrease the rate

• EDG = electron donating group

• EDG can be recognised by lone pairs on the atom adjacent to the π system, eg: -OCH₃

• except -R, -Ar or -vinyl (hyperconjugation, π electrons)

• EWG = electron withdrawing group

• EWG can be recognised either by the atom adjacent to the π system having several bonds to more electronegative atoms, or, 

having a formal +ve or δ +ve charge, eg: -CO₂R, -NO₂

• EDG / activating groups direct ortho / para

• EWG / deactivating groups direct meta

• except halogens (-X) which are deactivating BUT direct ortho / para

• EDG add electron density to the π system making it more nucleophilic

• EWG remove electron density from the π system making it less nucleophilic.

There are two main electronic effects that substituents can exert:

RESONANCE effects are those that occur through the pi system and can be represented by resonance structures. These can be either electron donating (e.g. -OCH₃) where pi electrons are pushed toward the arene or electron withdrawing (e.g. -C=O) where pi electrons are drawn away from the arene.

In certain cases, molecules can be represent by more than one reasonable Lewis structure that differ only in the location of π electrons.
Electrons in σ bonds have a fixed location and so they are said to be localised.
In contrast,  π electrons that can be drawn in different locations are said to be delocalised.
Collectively these Lewis diagrams are then known as resonance structures or resonance contributors or resonance canonicals.
The "real" structure has characteristics of each of the contributors, and is often represented as the resonance hybrid (think of a hybrid breed which is a mixed breed).  In a way, the resonance hybrid is a mixture of the contributors.

(note that a resonance hybrid cannot normally be written as an individual Lewis diagram !).

The best way to "derive" resonance structures is by learning to "push" curly arrows and starting from a reasonable Lewis structure.
 

INDUCTIVE effects are those that occur through the sigma system due to electronegativity effects.  These too can be either electron donating electron donating (e.g. -Me) where sigma electrons are pushed toward the arene or electron withdrawing (e.g. -CF₃, +NR₃) where sigma electrons are drawn away from the arene.

Electronegativity

• Electronegativity is defined as the ability of an atom to attract electrons towards itself.
• It is one of the most important properties for rationalising and predicting reactivity etc.
• The partial periodic table below has the Pauling electronegativities of some key elements.

• Electronegativity increases left to right across a row in the periodic table   e.g. C < N < O < F
  (as you move left to right nuclear charge increases so there is a greater attraction for electrons)
   
• Electronegativity decreases as you move down a group in the periodic table  e.g. F > Cl > Br > I
  (each step down a group increases the atomic radii as a "new shell" of electrons are added and the nuclear charge is further shielded by the core electrons, both factors decrease the attraction for electrons)
   
• F is the most electronegative element
  
   
• Metals, e.g. Li and Mg, are less electronegative than C  (i.e. metals are electropositive compared to C)

A simplified approach to understanding substituent effects is provided, based on the "isolated molecule approach".  The text (as do most others) uses the more rigourous approach of drawing the resonance structures for each of the intermediate carbocations formed by attack at each of the o-, m-  and p- positions and looking at how the initial substituent influences the stability of the system.
 

We are going to break down the types of substituents into various subgroups based on the structural features of the substituent immediately adjacent to the aromatic ring:
 

• type 1 = substituents with lone pairs (e.g. -OCH₃, -NH₂) on the atoms adjacent to the pisystem.
   

• type 2 = substituents that are CH systems (i.e. -alkyl, -vinyl or -aryl).

• type 3 = substituents that are C=C systems (i.e. -vinyl or -aryl).

• type 4 = substituents with pi bonds to electronegative atoms (e.g. -C=O, -CF₃, -NO₂)

• type 5 = substituents with several bonds to electronegative atoms (e.g.  -CF₃)

• type 6 = substituents that are halogens systems (i.e. -F, -Cl, -Br, -I)