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A decal is basically a sheet on vinyl cut to fit the contours of your Xbox 360 console. Some companies differ with how they make them; some offer decals for the entire console – both side and face, while other companies only offer decals for the side or face.
Decals look great because the vinyl is generally reflective and shiny. If the design is shaped to fit your console right it can look amazing, literally like a skin slipped over it. A decal that is too large or cut improperly can be very obvious, especially around the face if it doesn't fit the disc tray or buttons evenly, but this is becoming rarer and rarer with a huge amount of decals becomign available in amost any design especially on aution sites like ebay.
Aside from making your Xbox look great decals also help to protect against surface scratches.They also come off relatively easy and rarly leave any marks.
NOTE: A decal is not thick enough to protect your console from any other type of damage such as falls etc.