Decorator pattern dynamically changes the functionality of an object at run-time.
Composition and inheritance have been effectively used to achieve the goal.
A real world example: Compute the price of beverage, which may contain multiple flavours.
abstract class Beverage {
    protected String name;
    protected int price;
    public Beverage(){
        
    }
    public  Beverage(String name){
        this.name = name;
    }
    public void setName(String name){
        this.name = name;
    }
    public String getName(){
        return name;
    }
    protected void setPrice(int price){
        this.price = price;
    }
    protected int getPrice(){
        return price;
    }
    protected abstract void decorateBeverage();
    
}
class Tea extends Beverage{
    public Tea(String name){
        super(name);
        setPrice(10);
    }
    public void decorateBeverage(){
        System.out.println("Cost of:"+ name +":"+ price);
        // You can add some more functionality
    }
}
class Coffee extends Beverage{
    public Coffee(String name){
        super(name);
        setPrice(15);
    }
    public void decorateBeverage(){
        System.out.println("Cost of:"+ name +":"+ price);
        // You can add some more functionality
    }   
}
abstract class BeverageDecorator extends Beverage {
    protected Beverage beverage;
    public BeverageDecorator(Beverage beverage){    
        this.beverage = beverage;   
        setName(beverage.getName()+"+"+getDecoratedName());
        setPrice(beverage.getPrice()+getIncrementPrice());
    }
    public void decorateBeverage(){
        beverage.decorateBeverage();
        System.out.println("Cost of:"+getName()+":"+getPrice());
    }   
    public abstract int getIncrementPrice();
    public abstract String getDecoratedName();
}
class SugarDecorator extends BeverageDecorator{
    public SugarDecorator(Beverage beverage){
        super(beverage);
    }
    public void decorateBeverage(){
        super.decorateBeverage();
        decorateSugar();        
    }
    public void decorateSugar(){
        System.out.println("Added Sugar to:"+beverage.getName());
    }
    public int getIncrementPrice(){
        return 5;
    }
    public String getDecoratedName(){
        return "Sugar";
    }
}
class LemonDecorator extends BeverageDecorator{
    public LemonDecorator(Beverage beverage){
        super(beverage);
    }
    public void decorateBeverage(){
        super.decorateBeverage();
        decorateLemon();    
    }
    public void decorateLemon(){
        System.out.println("Added Lemon to:"+beverage.getName());       
    }
    public int getIncrementPrice(){
        return 3;
    }
    public String getDecoratedName(){
        return "Lemon";
    }
}
public class VendingMachineDecorator {  
    public static void main(String args[]){
        Beverage beverage = new SugarDecorator(new LemonDecorator(new Tea("Assam Tea")));
        beverage.decorateBeverage();
        beverage = new SugarDecorator(new LemonDecorator(new Coffee("Cappuccino")));
        beverage.decorateBeverage();
    }
}
output:
Cost of:Assam Tea:10
Cost of:Assam Tea+Lemon:13
Added Lemon to:Assam Tea
Cost of:Assam Tea+Lemon+Sugar:18
Added Sugar to:Assam Tea+Lemon
Cost of:Cappuccino:15
Cost of:Cappuccino+Lemon:18
Added Lemon to:Cappuccino
Cost of:Cappuccino+Lemon+Sugar:23
Added Sugar to:Cappuccino+Lemon
This example computes cost of beverage in Vending Machine after adding many flavours to the beverage.
In above example:
Cost of Tea = 10, Lemon = 3 and Sugar = 5. If you make Sugar + Lemon + Tea, it costs 18.
Cost of Coffee =15, Lemon = 3 and Sugar = 5. If you make Sugar + Lemon + Coffee, it costs 23
By using same Decorator for both beverages ( Tea and Coffee ), the number of sub-classes have been reduced. In absence of  Decorator pattern, you should have different sub classes for different combinations.
The combinations will be like this:
SugarLemonTea
SugarTea
LemonTea
SugarLemonCapaccuino
SugarCapaccuino
LemonCapaccuino
etc.
By using same Decorator for both beverages, the number of sub-classes have been reduced.
Related SE question:
Use Cases and Examples of GoF Decorator Pattern for IO