We tend to think of decals as decoration. Plenty of plastic model kits had decals to fill in the intricate details. But the vehicles that those plastic models represented had details that were often far from decorative. Military marking served a purpose, denoting the nationality was just one function of markings. Even the advertising on sports cars served a purpose beyond decoration. Plastic model decals were actually reproducing real world advertisements or military markings.
Mechanical and electrical hobbies often required labelling. Even something as basic as a radio needs numbers on a dial. Hobbyists could give their projects a professional look by using custom decals.
Guitar decals are popular for customizing instruments. This sees an overlap of style and function. Frets are marked for practical reasons. This is usually an inlay rather than a decal, but decals are used too. Controls are occasionally marked, but as these are few in number they are often left unmarked. Most other instrument decals are for decorative purposes.
Effects processors for guitars and other instruments use decals for labelling controls. As these controls are slightly more complex than the volume and tone knobs of the guitar this labelling is essential. The internet has many sites dedicated to DIY projects for guitars; they appear to be popular. Custom decals for these projects is quite useful.
Inkjet decal paper allows decals to be made at home, specifically designed for any project. Style and function can be combined with ease.