Capacitor into resistor to ground
IC1A intentionally is set to have high gain and it's a non-inverting amplifier like this: -



R5 in the OP's circuit is equivalent to R1 above.

However, it has two extra features that work together. The diodes in the OP's circuit heavily clip the guitar signal and this produces "wanted" distortion that can be adjusted by VR1. Note that the signal is clipped asymmetrically to provide a different type of characteristic "sound" compared to symmetrical clipping. The asymmetry means that R5 must then be capacitively connected (via C3) to stop the natural DC offset produced by the asymmetry causing the circuit not to work correctly i.e. it stops the output developing a significant DC offset that would tend to make clipping more or less symmetrical.