Using √model railroad decals is one of those details on a train layout that makes a huge difference in creating interest and in establishing the era and locale of your model railroad - whether your layout is prototypical or freelanced.
If your layout is based on the prototype, decals are absolutely essential to show what railroad you are modeling, and where, and when, so that it is somewhat recognizable to your visitors and should be as close to the original wording and graphics as possible, based on pictures or memory. Also the names that are given to landmarks on your layout help tremendously in operating sessions. The operators need to know what cities or yards they are transporting railcars to and from and they need to know the names of the industries or passenger stations they are serving.
In a sense, making or using decals for prototypical railroads may be somewhat easier, because you already know what they need to look like or say, and the decal that you are looking for may be readily available to purchase.
In the world of freelance model railroading, you have much more freedom in the style, graphics and wording that goes on each decal. You still have to establish the general era and locale of your railroad and what general industries it serves, but the rest is up to you.
On a freelanced layout, model railroad decals can be comical or serious. You can use names of family members on various industries, shops, towns or landmarks, which always adds a lot of interest and fun when they come to visit. Western places can be named after cowboys or can be given Indian names. The point is to use your decals to let your visitors know what your model railroad is all about. But it doesn't hurt to have fun with it as well.
The only problem is that the decal that you want to display may not be available for purchase. So you have to make your own.
First you need to find just the right decals that match your theme, era and locale. Look through catalogs, magazines and newspapers. Take pictures of the items that you want to use for decals. The next time you go to a train show, take pictures of train logos and lettering, signs and billboards, etc. Or if you visit a train museum, take pictures there as well, keeping in mind that you might be able to use these as decals.
Pick one of your pictures to use as a decal and open it up on your computer photo software. Resize it to just the right width and length to fit on the building or √billboard where you wish to place it. Then print it out on decal paper - either the peel-and-stick kind, or the waterslide kind. Or you can just use regular paper or standard photo paper. Then cut out the decal carefully using sharp scissors or a sharp hobby knife on your work table pad.
Then, depending on your √decal paper, if it's peel and stick, you can either stick it on the building carefully using tweezers to place it properly or, if the decal paper is the waterslide kind, wet it and slide it into position using a wet cotton tip applicator. If you mess it up, just print it out again and start over. If it's just on standard copy or photo paper, brush on a thin layer of white glue on the back of the decal and on the place where you want to put it. Then apply it with tweezers, making sure it's in the proper position.
If you want the decal to look weathered, after it has dried, brush on some diluted India Ink or sepia-colored paint, or use colored chalk and brush that on instead. You can also use a pencil eraser to gently rub over the dried decal to make the edges looked ratty and partially gone.
After you have placed the decal in proper position and weathered it as needed, don't forget to apply a √sealer or bonding agent so it doesn't start peeling off later.
Evans Designs has a great supply of decals and decal paper that you can purchase online, either separately or as a bundle.
The use of √ model railroad decals on your layout is unlimited. Use your imagination. Put graffiti on railcars, create your own railroad name or logo for your locomotives, use them for street signs, directional arrows, billboards, fences and of course on industries and stores, wherever it makes sense to put one. They will add a ton of realism to your layout, as well as identifying your theme and era, and may add a little humor as well to some of your scenes.
Lots of model railroad decals are also available at K4 Decals.