Smoke came out of my transistor, but it still works. Why?
Temperature can destroy your transistors in several ways:

If the dissipation was too high, but not enormous (say, 20W in a TO220 not mounted on a heat sink) then it will slowly overheat and the plastic will  smoke, but it will still work for a few seconds before the die cracks, or the bondwires melt. MOSFETs still work at 300°C, although not for very long! Since you cut the power it didn't reach that stage. You should not use this transistor again, as its characteristics could have shifted, also it will have a much higher probability of failure than a brand new one which hasn't been overcooked.

I believe this is what happened.

Also, MOSFETs work perfectly fine at 200°C (although lifetime is reduced). There is a particular model of car which has a MOSFET on one of the boards inside the dashboard to control the lights. They screwed up the thermal design, so the thing actually melts its own solder and falls off the board on speed bumps. But if you solder it back and add a heat sink, it'll still work...

Another way to kill a transistor is localized failure modes like second breakdown, thermal runaway, or avalanche, etc. In this case the transistor is dead, a tiny portion of the die inside will have blown and melted, shorting things out, sometimes without any external sign of any problem.

However, if dissipation is more on the "explosive" side, like shorting a 4700µF capacitor charged to 30V with a MOSFET... With 0.1 ohm total ESR in the circuit this gives 300 amps and thus a correspondingly enormous amount of watts... in this case there is a bang, part of the die is vaporized, usually leaving a small crater in the plastic package, like a mini volcano. If the power supply is strong enough, there can even be a jet of flames...