Not trying to be funny, but the incense-like fragrance is incense.
It is used in the Catholic liturgy at a few moments. Typically the altar is incensed at the beginning of the Mass, the Evangelical (book with the readings from the Gospel) is incensed before reading the Gospel, the priest, deacon, acolytes and the people are incensed before the Eucharist. The priest incenses the bread and wine/body and blood of Christ during Eucharist. And in between the incense keeps burning.
So yes, you should be able to smell it.
The significance is mainly that this way the people and objects that are incensed are kind of blessed. The incense is also said to carry our prayers to heaven, but that is not to be taken all to literal.
There is also a very practical side to it: people are supposed to be sober (no eating or drinking before) when attending Mass, which doesn’t always help the smell of your breath. In a full church, some incense can help to suppress the smell of the people.