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Fire is something in RimWorld that is capable of damaging anything it touches, and can destroy significantly large areas of the map if fires are left uncontrolled. If an object is caught on fire; it'll take damage over time. How much damage it takes depends on the flammability of the material it was constructed from. If a pawn or an animal catches fire, they will effectively be disabled momentarily as they panic and attempt to extinguish the fire on them and also wander into possibly open areas, leaving them highly vulnerable to attack.
Should an interior reach a high enough temperature (~235C/455F/508K); everything inside that room that's flammable will catch fire, and an orange haze effect will appear in any room above that threshold.
Fire has several uses in the game including...
Dealing with Infestations
Infestations can be a real headache to dispose of, especially later game when they can be spread around multiple caves that you may have mined out, or on higher difficulties and higher wealth. Fire is a very effective way of disposing with infestations: equip somebody with an incendiary launcher or molotov cocktails, attack the hives one at a time (for optimal safety), run and let the hive(s) burn. When there are no hives, insects will no longer be hostile, allowing you to deal with them whenever you please. If you can get the caves walled (ideally out of any stone, and double thick) and roofed up and line the floors with enough power conduits, you can simply fire at a conduit and forget: the fire will gradually spread to other conduits, insects will collapse and eventually die of heatstroke or burns, and even hives will ignite if the temperature passes the magical threshold.
This tactic is most useful mid-game: before many of your colonists have charge rifles, and when enemies become bigger threats. Enemies will have fairly powerful weapons, and it's good to disable those that could be considerable threats (e.g. grenadiers, triple-rocket launchers, high grade weapons) while another colonist deals with them.