Additional features availble on a decoder, such as lighting circuits and effects. They are controlled from the throttle using the function buttons.
Functions are additional circuits/outputs on a decoder that can control nearly anything you can think of - lights, sounds, smoke, animation, uncoupling devices, etc. Many are not limited to simple on/off functions - for example lighting functions are capable of imitating Mars Lights, Gyralites, Rule 17 dimming, single or double flashing strobes, ditch lights, and other effects. Output is generally 12 volts DC - if you want to use LEDs or low-voltage lights, you'll need to use a resistor as well. See the decoder's documentation as some have settings for LEDs.
There are currently 29 functions, F0-F28. Many Digital Command Control systems now support 29 functions, while some may still only support 13, F0-12. Function support depends on the software in the command station. Some decoders are now offering logic level outputs, which when coupled with a daughterboard in the locomotive, allow for many more functions or features to be created without a corresponding increase in outputs from the decoder.
The NMRA DCC standard doesn't define functions, but allows for features such as this.