Moderation basically spreads or updates through the reactor every second: Every second a reactor rod checks if it was tagged to be moderated last second and when it was, it will be turned moderated, when not it will be turned unmoderated. Then that rod will interact with all adjacent fuel rods and if it is moderated, it will tag those rods it interacted with for moderation. The moderator mod is obviously always be moderated and thus tag all adjacent fuel rods for moderation.
The thing to note is that the moderation is not on the reactor blocks, but on the rods and only fuel rods will be able to get moderated, making only fuel and moderator rods able to spread moderation to adjacent fuel rods.
To get rid of the moderation on a fuel rod in a reactor, simply turn of the adjacent rods that apply the moderation to it for at least a second. Moderation will also updated when the reactor or rods are turned off, so shutting down your whole reactor also will unmoderate all fuel rods, but a shut down fuel rod will still be able to be moderated by an active one.
TD;DR: Moderation spreads every second from all moderated rods (moderated fuel rods and moderator rods) to all adjacent fuel rods, creating more moderated fuel rods which will then spread the moderation to potentially more fuel rods on the next second.
Hope this all helps.