Moderating variables (aka effect modifier, interacting variable, etc.) alter the effect of another variable. In your example increased stress causes decreased well-being, but this effect is altered in the presence of locus of control.
Of course, nothing prevents a moderating variable from having its own direct effect (aka main effect). An example here would be respiratory exposure to tobacco smoke, and respiratory exposure to asbestos: tobacco smoke exposure increases risk of mesothelioma; however, the micro-scale mechanical damage wrought by asbestos exposure actually increases the toxic effect of tobacco smoke (asbestos exposure moderates the effect of tobacco smoke exposure on mesothelioma risk), and asbestos on its own and in the absence of tobacco smoke exposure also increases risk of mesothelioma. So asbestos exposure increases mesothelioma risk, and moderates the effect of tobacco smoke exposure on same.
Mediating effects are different. Mediating effects are "in the middle" of a causal chain from a distal cause to some effect. For example ingesting cyanide causes death (from hypoxia). However, the effect of cyanide ingestion on hypoxia is mediated by the inactivation of cytochrome oxidase. Put another way, ingestion of cyanide has an effect on cytochrome oxidase (making it inactive), and this inactivation of cytochrome oxydase in turn causes hypoxia.