What are the advantages of using full screen vs normal modal? I've seen sites like Airbnb & Slack use white full-screen overlay. How does it impact usability? Are there any advantages for using such type of overlay?
A full screen modal interrupts the workflow of the user and forces their attention towards the modal content. This works well if you want users to undertake actions which require full attention and/or precautions, and you don't want users to be distracted by content laying beneath the modal.
The choice between full screen modals and overlay modals depends on what you want to achieve; is your complete undivided attention required as a user? Then opt for full screen modals. Are the modals simply offering more information to the content that lies below the modal? Show the content underneath for context.
If your users are losing context - don't use full screen modals. If you have too much content to show, dedicate a page to it.