AKA Pot fire. Very, very common.
A bit scary if a ceramic one explodes though, cant half give you a fright.
Basically, the 3rd rail sits on a load of ceramic or plastic pots. The pots become full of crap, (dust, litter etc) and eventually ignites. In the Underground sections this creates a lot of smoke so trains have to stop and the line is isolated to prevent further damage or to contain any further spread of fires.
This is being combated by using plastic pots, but obviously as there are so many pots to be replaced this is pretty much as and when one explodes.
It wouldn't be extinguished, it would be left to sort itself out...
No real harm to anyone, just a little disruptive when they occur.