Hi there, welcome to BYC!
100% no that isn't what shrink wrapping or drowning look like.
All the info about carefully selecting eggs and such.. is good GENERAL rules of thumb but very few things are set in stone. Temperature being the MOST important.
First, congrats on your new babies!
Next, to the gritty Q and A..
What incubator, at what temperature and humidity? Verified by the bator or by calibrated equipment?
Eggs from your flock, elsewhere, or shipped?
Did they hatch on day 21? Upright, sideways, auto, or hand turned?
Was day 15 the first time you candled? Or why are you going to candle less?
When you cracked the eggs were there an that had developed but quit or they appeared to be infertile? If from your flock, hen to rooster ratio and age of birds please? Also breed?
I agree, I think that may have been a quitter that rotted.. this could be a version of exploding.. I've never yet had a blow out like that.. with hundreds of chicks under my wing. But there's a first time for everything! And them little buggers do play soccer with unhatched eggs sometimes.
The sniff test can be informative, indeed. If you smell funk.. sometimes rot or even death.. I have left the bator running long enough to see anything was still going to hatch in my early days to smell it.. Since I NOW actively breed and select hard for vigor in my stock AND have my hatch frame dialed in.. it's usually easier to identify embryo condition in lighter colored eggs and I can more confidently make the call to discard eggs sooner..
Undeveloped eggs and early quitters.. get boiled or scrambled and fed back to my animals instead of tossed. ONE time, I misread an egg and had an eye with an active heart beat looking at me when I cracked it open. But TOO wanted to verify my read. It was an awful experience.. BUT that was NOT developing at the same rate as others.. so MAYBE it was still the right call or would have just been a quitter closer to hatch or a weak link.. Basically this is what keeps chickens fun for me, the learning never stops!
Couple resources for hatch failure analysis including what day they quit and so on..
Hatchability Problem
Failure analysis starts around page 52, I think. This is a fantastic resource, bookmark it..
Incubation guide
Of course the place that started it all for me, right here in this very wonderful community..
A great resource, with some out dated links but still LOTS of valid stuff to review..
Hatching Eggs 101
Happy hatching, it's addictive!

ETA: I ALSO thought it looked like waste.. MGG is onto something! Is the chick still hatching and that's just zipping?!