Both actuallyYou're thinking of it as a deterrent?
I've thought it would be useful for marking dogs, to settle questions of whether it was really THAT dog that was intruding.
(I have no actual experience with paintballs, so I don't know how it feels to be hit with one.)
Without proper padding, on people it will usually leave decent welts. Not sure how decent hair would be as padding, especially shorthair dogs