Title says it all.

It makes your global rank lower, not just the mod rank.

Everytime you win, your rank goes up.

Your rank goes up by a certain amount depending on how good your opponent was and how good you are.

That's your mod rank.All of your mods ranks accumulate into one rank, your global rank.
These all can be put to numbers, starting at 1600.

The ELO penalty subtracts 1 point from your cumulative rating, targeting your overall global rank. 1 point could mean you go down no ranks, or it could mean you go down 1,000 ranks. It's all relative to how close you are with other people in rating.