My understanding is that it makes a more noticeable difference when used on an acoustic than with an electric. I built a few hand carved mantels with it, and it is truly beautiful.
Here's a good explanation I found related to acoustic guitars:
[FONT=Arial, Helvetica, sans-serif]Highly figured Koa is a prized tonewood for both its beauty and influence on sound. Koa produces a warm rich sound – somewhere between the darker sounds that Rosewood guitars produce and the clean bright sound of a Maple guitar. Increasingly, Koa is becoming difficult and very expensive to obtain in master-grade sets. This wood is likely to see a dramatic rise in price over the next several years. The wood is native to, and only grows on the islands of Hawaii. [/FONT]