I have one of these. When it works, it can make the difference between a station being completely drowned out by noise and being clear as day, but it takes a little time and careful setup to get the best results.
Ideally, you need a second 'noise' antenna that can pick up the offending noise source with about the same strength as your main antenna. If the noise is highly localized (e.g. someone in the apartment upstairs running a vacuum cleaner), then the built-in whip antenna may be good enough. But for more distant noise sources, you definitely need an external antenna. For example, I typically hear an annoying 'whooshing' sound on 75 meters, right around 3950 or so. With the whip antenna, I can't do anything to reduce this at all, but with an external noise antenna I can null it out pretty well. (Unfortunately, this noise tends to shift in frequency over time, which forces me to keep adjusting the phase control to keep it at bay.)
There's a jumper inside that controls which noise antenna input is used. The factory default is to use the built-in whip: if you want plug in an external noise antenna instead, then you need to take the cover off and shift the jumper position.
Also, inside the unit, in series with the external antenna connector, is a small light bulb. (I don't remember the exact specs on it, but it's documented in the manual.) This bulb is intended to act as a fuse, because when an external antenna is used, it will easily pick up RF from your transmitter antenna, and the resulting high RF voltages can damage the device's circuitry. I've seen this bulb glow pretty brightly a few times when operating on 40 meters, and managed to burn it out once. It's not that hard to find suitable replacements though (I found some at Radio Shack with similar specs).
It's probably a good idea to set up a relay that grounds the noise antenna when the transmitter is engaged. If you can't help but having a lot of RF picked up by the noise antenna, this might be a good way to deal with it.
There is a relay inside the unit that activates when it senses a transmit signal. When it engages, it bypasses the phasing circuitry and shunts the transmitter input directly to the main antenna output. (Why they didn't also have this relay ground out the noise antenna I have no idea.) There's a delay control knob that adjusts how long it takes for the relay to disengage. This is for use when operating in SSB mode, to avoid relay chattering.
Figuring out how to null out a noise signal takes some practice. You're basically trying to tune it so that the noise is detected in your receiver at the same level on both the main antenna and the noise antenna. If you're lucky, you'll be able to just keep the main antenna gain at maximum, and then bring up the noise antenna gain until it matches. At that point, you can use the phase control to find the 'sweet spot' where the noise is canceled out. I was one of those people who went from "this thing is a worthless piece of junk" to "holy cow, that's amazing" when I finally got the hang of it.
Note that it's not the sort of thing that can lower your overall noise floor: it only works to cancel out one noise source at a time. You'll have to re-tune it as you move between different frequencies and encounter different noise signals.
Unfortunately, since I live in downtown San Francisco, my main problem is just a generally high noise floor. I occasionally pick up motor or alternator noise (I live right near a busy intersection), but I can deal with that pretty effectively using the noise blanker in the TS-850. Consequently, I haven't had the MFJ 1026 in line a lot lately.
-Bill