Decals you are familiar with. The ones commercially available, as opposed to the self-made ones, come in a fairly wide variety. The really nice ones are now digital prints on clear backer film, but they were made with multiple silkscreen layers in the past. Any time something is printed in multiple layers, the layers need to be "registered". In other words the layers need to be precisely placed one over the other. Often you will see what are called "reg", or registration marks around the border of the print. Those look like little bullseyes.
When something is out of register, it's obvious because teh elements aren't lined up. Sometimes it just looks a little blurred, or the center red dot in a white circle isn't in the middle. This is the result of a hurried or not carefully controlled process.
It's more information than necesssary here, but then going down the scale into small production runs, things can change.
Stencils, as you may imagine, are masks. For instance, a white star decal would be a white printed star on a clear surrounding background. A white star made with a stencil would be an opening cut into a piece of self adhesive paper or tape. Place it on the model, paint the white star, and remove the stencil mask.
It's a more prototypical way to do things, and can really make a difference in appearance for larger scale markings. It has limitations, it can't do small dense blocks of type.
But imagine building a beat up Japanese prop fighter with a lot of chipping, wear marks and dirt. A bright red decal dot takes a lot of work to blend into the surrounding finish. A painted red dot made with a faded color of red will look great.
I hope that's helpful,
Bill