While play testing the campaign, our convoy got jumped by the Admiral Hipper in the Western Approaches during broad daylight. The freighters turned away, the escorts laid smoke and turned into the enemy. Fortunately the wind was in the exact direction for a full smoke screen and the perfect screenshot!
Ships can lay smoke during their movement phase instead of performing a subsequent attack action. Smoke will move out in the direction of the wind and provides cover. Range finding is penalised and shot history is disabled whenever smoke blocks line of sight to a target.