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The decay is a new mechanic introduced in Kingdom: Two Crowns with the campaign mode. From now on, your islands are persistent and so, when you die or you sail away from them, they won't reset. Instead of this, time goes by and decay happens slowly.  It destroys your walls and towers one by one, and can make a lot of your subjects unemployed.
If you die, you'll start a new reign,you'll start on the previous island or if you died on island 1 you come back to island 1, with the kingdom somewhat in ruin due to a "decay period" of approximately 100 days (in addition of the time you may have been away from this island). 
For now, we don't know exactly how it will works, but the more protected you let an island when you leave, by having a lot of strong walls, the best she will resist decay while you'll be away. An iron wall can survive thirty days. 
Now that it is possible to defeat the Greed, it would be logical that once wiped out of an island, the decay won't happen there anymore.