Propane and any of several kinds of mercaptan used as oderants are mixed at the refinery. Due to pressures in the tanks and the physical characteristics (liquefying) of gases at those pressures, the gases mix as a sort of a solution.
Mercaptan is an extremely pungent material, and is detectable at one part per billion. OSHA limits use to 10 parts per million. This means, very little amount of mercaptan needs to be used for the purpose of oderant. As a result, the slightest amount of contaminants in tanks, valves, or piping; or the slightest mistake in refinery, distribution, or filling, can have a huge impact on its effectiveness.
Mercaptan reacts to many things it comes into contact with, and once this happens it no longer has the properties it was designed to be used for - a means to detect gas leaks.
When you can no longer smell the gas, it is said to have "faded". There are many causes for odor fade:
When propane gas is consumed, it depressurizes and becomes a gas. Because propane boils and turns to a gas at very low temperatures, -44F, it remains a gas in most environments. But mercaptan boils and turns to gas at about 42F, and things get complicated here. Above 42F, mercaptan is a gas, and so, is easily detected. Below 42F, mercaptan is a liquid. In this state, it has little means to reach our olfactory senses, except through propane gas itself, which it does so as tiny droplets of liquid. When the amount of propane leakage is small, then smelling mercaptan becomes more difficult to do. This is why in the cold, it can be difficult to detect by smell.
If the wrong type of canister is used to store the propane, there can be a reaction between the tank walls and the mercaptan. For example, one form of mercaptan, called tertiary butyl mercaptan, can react with porous walls of new steel pipe, valves, or tanks. Specifically, it reacts with mill scale and rust, which includes metal oxides, and forms disulfides which are less odorous than mercaptan - thus causing odor fade.
If the wrong method of filling a propane tank is used, where air might be introduced into the tank, the mercaptan can react with the air, weakening the effect of the odorant. What happens here, is pipes, tanks, and valves can re-oxidize, forming more iron oxide or other rust compounds, which can oxidize the mercaptan and create disulfides.
The valves and tubes (and tank) need to be treated - pickled, usually by mercaptan - and if the right tank were used with the wrong tubing or valves, that will cause odor fade as the mercaptan adsorbs to the tank or valves.
If the propane contains impurities, there's a potential for reactions. Naturally odorized gas usually contains sulfides and mercaptan, and together creates potential for oxidation and disulfide conversion. For this reason, most places restrict naturally odorized gas use in consumer use.
Outside the tank, odors are not really faded - but some materials can adsorb the mercaptan (adsorb means to stick to, whereas absorb means to mix). If there is a leak of propane, you'd expect to smell it. But if the leak occurred underground, the mercaptan reacts with soil, leaving odorless propane. Worse, it will settle into low areas. Propane is not poisonous, but it is an asphyxiant. If propane gathers in low areas, you might escape explosion hazards, but you wont escape oxygen depletion.
Mercaptan is also reactive to masonry and fabrics. This is one reason, among many others, propane should not be stored indoors. Leaks can have mercaptan adsorbed into walls, furniture, flooring, and fabrics. Of course, this leaves a more permanent smell, and over time, you become "odor fatigued".
Odor fatigue can occur when you constantly smell a substance - like mercaptan - and you get used to it. Being near water treatment plants which give off gases reminiscent of mercaptan, or near landfills which give off similar gasses, you become used to the smell and then don't notice it much anymore.
Odors can be masked, as well. Working in environments with strong odors - stronger than mercaptan - can dull your senses and you can miss the mercaptan.
People who are older can lose olfactory senses and not notice a problem.
People who are sick, such as those who have colds, their olfactory senses are dulled.
Finally, improper consumption of propane can cause odor fade. It is not uncommon to use a portable BBQ grill with an inflexible pipe connected to a 1lb canister which is upside down. In this case, due to the design of the canister, liquid propane pours through the valves and piping and into the stove. The liquified propane does not mix with air well, and so, you note incomplete combustion by way of yellow flames and soot. (It's a huge waste of propane as well.) If there was a leak, the sooty byproduct of the stove burner can easily mask the smell - even burn along with it. In addition, this incomplete combustion also produces a highly toxic gas, called carbon monoxide. Any time you note yellow flames produced from natural gas, propane, butane, or any mixtures therein, you're sure to wind up with CO. Just one more reason to keep the burner outside or have a proper ventilated system. And to be sure the canisters are always upright. In fact, some 20lb tanks are designed to shut off if they are tilted.