Smoke is a temporary terrain object that inflicts Shooting Accuracy penalties on ranged attacks made through it.
Smoke does no damage, and does not affect pawns in any way except by inflicting accuracy penalties. The smoke reduces hit chance by 70% for any projectile that paths through smoke (hit chance is multiplied by 0.3). Shooters will still be affected by smoke even when neither them nor the targets are standing in it, so long as there is smoke in between them. It does not affect melee attacks. It dissipates after around 30 seconds. Turrets, both player and enemy alike, cannot target through smoke - keeping at least one tile of smoke between a pawn and a turret will entirely prevent it from attacking. Enemies with smoke weapons equipped will automatically smoke themselves when a turret is detected.
Unlike real smoke, it is not created by Fire instead it can only be created in the following ways:
It can also be created with the "T: Explosion (smoke)" Development mode command.