You can do this with surface GUI and frames with UI gradient inside, seeing how it’s sharp on the ends it’s likely how they did it as well. Decals would shape around the arm which might look better.
If you handle the effect on the server it will mostly have an effect on the network usage (that is probably going to be very minimal anyway), but if you’re applying and handling the effect exclusively on the clientside, then there will not be any extra performance cost
Yeah, mostly render time, if you do the surface GUI route you could try a caching system so you don’t need to create the same set of hierarchy every time it’s activated. I haven’t tested between the three, texture, decal and surface GUI… But given that surface GUI doesn’t wrap around meshes so it might be more performant.
Update: Here’s an example model if you want to see this in Studio for yourself. The right arm uses Decals, while the left arm uses ScreenGuis. The right arm’s decals use a gradient image, as well. If you make your own gradient image using something like Photopea, you can control how far the color “fades in” to the model’s arm.