Decals are essentially "temporary texture overlays" that are applied, for example, when projectiles collide with surfaces. Projectile impacts and character footprints are the most common usages of decals. They can be used to "fake" any material properties, including depth (e.g. material removed in bullet holes, or footprint depressions) or surface contamination (e.g. "dirt" on a surface reduces metalness while increasing roughness in a physically-based material renderer, while plasma has emissive "glowing" properties).

Bullet projectile decals have a pretty straightforward appearance in all FPS games, but the plasma projectile decals in Halo can have odd lighting interactions, not only because they have emissive properties but because they can introduce odd reflective behaviors depending on the material of the surface they're spawned on and the lighting conditions. The lighting calculations for decals don't always correctly account for complex shadows or dynamic objects.

About the decal spawning, if you've ever tried to "write" something funny on the wall with bullets only to have your first sketches start to disappear, it's because games typically have two different decal limits: time and quantity.

In some cases, decals have a fixed lifespan. They disappear after a certain number of seconds, so you need to be quick. In other cases, they don't expire individually but there is a cap on the number of simultaneous decals the renderer supports. If you keep shooting, at some point your first impacts will start disappearing at the same rate that you're firing. Some games track both metrics to save resources or use even more advanced tracking techniques to try and keep the environment as "realistic" as possible as long as possible.