¶ Foreword: Why Stencil?
Simple answer: because Project Wingman's UV maps are often uncooperative and contain difficult distortion and stretching. It is often much easier to stamp a detail or decal onto a 3D model than to try lining up that detail or decal on a flat texture.
¶ Required Tools
This should go without saying, but you need Blender. You will also want image editing software, as described in the Useful Tools page.
¶ Model preparation
Before you can stencil any decals or details onto a diffuse texture, you'll obviously need the corresponding model. The guide on Basic Tools Usage explains how to export the models used by the game.
If using a new project in Blender, press A then Del to delete the camera, cube, and light.
After importing the .psk of your model into Blender, clear up the workspace a bit: Click the plane, then right-click and select Shade Smooth. Click the eye next to [model name].ao on the right-hand toolbox to hide the plane's skeleton.
Then swap to Material Preview if you'd like to see any textures on the Layout tab, instead of just on the Texture Paint and Shading tabs.
Go to the UV Editing tab, click UV Sync Selection in the top left corner, change to Face selection mode (next to the UV Sync Selection button), then navigate to the Material Properties tab on the right-hand toolbox. Find the plane's material (e.g., Aircraft_F16 for the F/C-16) and click Deselect.
Then, move the rest of the UV map off-screen so it isn't in the way.
Switch to the Texture Paint tab, increase the radius of the brush (default is 50 px), and set Falloff to Constant.
Then, on the Material Properties tab, create a new full-alpha image for the plane's material, preferably at least twice the size of the in-game textures.
Project Wingman generally uses 4096x4096 textures, so 8192x8192 is a decent starting place for stencil work.
At this point, pressing Tab twice while the mouse cursor is in the 3D viewport should cause the new blank texture to appear on the UV map on the left.
Switch to Object Mode and click + New to create a new brush.
¶ Stencil preparation
Stencils should be perfectly square if possible, and preferably PNG format.
I generally put a 1x1 px crosshair on my stencils if I need to line them up, since Blender inconveniently does not center stencils upon loading them onto the 3D viewport. At that point, if the camera is still centered on XYZ (0,0,0), I can go into orthographic view and line the crosshair up with two of the axes. Then, I can resave the stencil without the crosshair, reload it in Blender, and it will remain centered.
Click Open in Blender and navigate to your stencil texture. Then, while in Texture Paint mode, swap to the Active Tool and Workspace settings tab on the right-hand toolbox, and locate the Texture dropdown menu beneath the color picker in Brush Settings. Set Mapping to Stencil and click Image Aspect if your stencil image is not a perfect square.
If you do not click
Image Aspectand your stencil image is not perfectly square, Blender will stretch or shrink it to become a perfect square, causing it to become distorted.
At this point, your stencil will appear in the 3D viewport. Ctrl+RMB and Shift+RMB will allow you to manipulate it however you like relative to the model.
¶ Stamping and exporting
Click to draw on the 3D Viewport. Your stencil texture will get stamped onto the plane's model.
Click Image and Save As... when you're done stamping on with your stencils. After saving, load the new image into your image editing software of choice and scale it down to fit the canvas (e.g., from 8192x8192 to 4096x4096).
I tend to use TGA for saving an image from Blender, since it's simple and no important detail is lost.