How does this MOSFET soft distortion circuit work?
Check what current is flowing through the mosfets when V1 is set to 0V. You might be surprised to find that it is several amps making it unattractive for audio use especially if used in a battery powered pedal. If you try and add resistance to reduce this current you will likely linearize the desirable characteristic into something less desirable.

So, is this technique used at all - every common or garden CMOS chip uses this and, when run linearly give this characteristic: -




Pictures taken from this site.