Smarter than a simple Flare, a decoy is an active Infrared source tailored to the IR signature of a ships engine.
The electronic warfare systems onboard broadcast a radar signal that matches the mother ship close enough to fool most missile sensor heads.
This system means that the missile attracts all classes of IR/Radar seeker and some smart missiles away from the user. Once deployed the decoy flies off in a straight line, hopefully taking the missiles with it.