How to use sound effect plugins with iTunes on a Mac

Want to know what your music would sound like if played through a vintage amp or special effects pedal? Want to do it using free software on a Mac? The following worked for me.

Download and install Soundflower.

Feed sound from other Mac applications into Soundflower:
System Preferences -> Sound -> Output -> Select Soundflower (2ch)

Open GarageBand and tell it to get Soundflower input:
GarageBand -> Preferences -> Audio/Midi -> Audio Input -> Soundflower (2ch)

Now tell it to send output to the speakers or headphone jack:
GarageBand -> Preferences -> Audio/Midi -> Audio Output -> Built-In Output

Now create a single track with either the “Real Instrument” or “Electric Guitar” options in GarageBand. Make sure the input source is “Stereo 1/2 (Soundflower (2ch))” and Monitor is “on” in the track settings.

Open iTunes and play music through any GarageBand effect that you like. Voila!

Now, here is the real bonus: You can add Audio Unit plugins to GarageBand by placing them here:
/Library/Audio/Plug-Ins/Components/

For more details about plugins or Audio Units, read this.