Happens quite often, sometimes you see a black smoke pouring from the engine in which case you don't have to worry about the 109, the plane is actually burning and the pilot has to bale out. More often though he's back in shape in no time. Pretty weird and frustrating as you're usually close behind him and you can't shoot at all while the fireball is happening (those are Pokemons I suppose, I've heard about it before!) then you wink and he's scratching his elbow some 2km in front of you
Sitting in a 109, happened to me on some goulash server few times and all you see is a message saying your fuel is ignited. Then you look behind you and you say no, it isn't and carry on whatever you were doing.
Some fluids are leaking but no effect whatsoever.
You don't see much fires and smokes in the sim just yet, except for these very occasionally:
That's Valec doing some late afternoon BBQ above Hawkinge - first this massive fireball, then this trail, pilot luckily burned to his death. (cough)