Items can explode in some circumstances:

Inside Cargo

Whenever a block is destroyed and it had items in its inventory, depending on what those items are it can spawn an actual explosion.

Items that contribute to the explosion:

Component type with the Explosives SubtypeId.
All AmmoMagazine types.
- Note: because <ExplosiveDamageMultiplier> is not checked, it means even ones with 0 will trigger at least a visual explosion.

A Temporary Container with those items will also cause an explosion when destroyed, but only from these damage types:

All of these can also be used by mods to deal damage in whatever contexts they want.

The explosion

Damage is calculated from total item volume, each multiplied by its own <ExplosiveDamageMultiplier>, then the total added multiplied by GameDef.<ExplosionDamagePerLiter> and limited up to Game def's <ExplosionDamageMax>.
Range is calculated using Game def's <ExplosionAmmoVolumeMin> and <ExplosionAmmoVolumeMax> as a ratio for the min & max radius:
- For blocks: Game def's <ExplosionRadiusMin> and <ExplosionRadiusMax>
- For containers: hardcoded 0.5m and 100m.
Particle effect and sound are given the same value based on content volume:
- Explosion_AmmunitionTiny for less than 125 liters.
- Explosion_AmmunitionSmall for less than 16,000 liters.
- Explosion_AmmunitionMedium for less than 100,000 liters.
- Explosion_AmmunitionLarge for anything higher.

More details: Explosions

Loose items being damaged will also explode:

Hardcoded 800 damage
Range is calculated from the amount of items divided by 100, capped between 0.5m and 100m.
Uses Explosion_Warhead_15 particle effect
Uses item's <DestroySound> for the sound effect.

More details: Explosions