Moves must connect (i.e. deal damage to opponents) to be entered in the staling queue, that contains the 9 most recent moves that you have landed on an opponent, with 1 being the most recent, and 9 being the oldest. When the queue is full and another move connects, the oldest move, 9, on the list is removed.
For every time a move is listed in the staling queue, it is slightly weaker in damage and knockback (by how much idk exactly). Take for example sheik's fair. If it isn't one of the 9 moves on the staling queue, it deals 5% (sweetspot). Since sheik relies heavily on this move, it is often in the queue at least 3 or more times. As it is spammed and hits, the damage goes down to 3. Because of this, tinder combos don't tend to do a lot of damage for all the fair spamming that is required.
Now, this isn't to say staling is bad, as the reduced knockback allows for more combo potential at higher percents. Consider sheik's d throw. At kill percent, it can confirm into an up air, but after a certain threshold, it is no longer guaranteed (and thus her 50/50 is born). By staling d throw a bit, it extends the % range where up air is guaranteed and kills.
The general rule of thumb is that you want to use strong, killing moves (Fox up smash) only when you know they would kill, so that it actually DOES kill them (no staling). Conversely, combo moves tend to connect multiple times and are staled, naturally increasing their combo potential at the cost of damage.
