If you've played any of the Guitar Hero games, you'll know how this guitar works. In fact, I find the guitar that comes with Rock Band to be FAR superior to the many regular guitars we have lying around the house from the different versions of Guitar Hero. The long fret-wide buttons are much easier on the fingers. The addition of the second set of solo buttons is much better for quick clicking.

If you see a "short" (left to right) note, it doesn't need to be strummed - but note that you do have to hit the strummed note BEFORE that note for it to work. Otherwise (in real life terms) no string is vibrating to give sound to the note you're hitting.

Make sure you hold the guitar relatively vertical. Remember, moving the guitar neck "up" is what activates the overdrive. If you tend to play with the guitar neck high, it's going to auto activate the overdrive. It'll think you're raising the neck on purpose. The same holds true for wild movements while you are playing. If you are jumping around while you play and the neck moves upwards, the game will think you're trying to activate overdrive. The game isn't a mind reader :)

Rock Band Walkthrough

Rock Band Review