There are two ways to show that a resource is on leave.
First: Add a nonworking exception in resource profile. Click to view the related training video.
Second: Create a project named 'Leave' (or as per your preference) and then schedule the resource on that leave project.
On Scheduling Chart, both will indicate that resource is on leave.
Option 1: Adding non-working exception in the resource profile.

Exception on Wednesday 10th June is clearly visible in grey.
Option 2: Schedule the resource on project named 'Leave' and disable parallel booking.

It clearly shows that resource is on leave on Wednesday 10th June and is scheduled on Project A rest of the week.
Both options have different technical merits. Adding a non-working exception technically takes away / removes the resource capacity on the dates when he is on leave, balance is available for project work. Whereas, scheduling resource on a project assigns his capacity, so reduced balance capacity is available for other project work.
Reporting difference...
Example: John works 8 hours every day from Monday to Friday, total of 40 hours a week, so his 100% capacity in a week = 40 hours. He takes leave on one particular Wednesday (8 hours). Rest of that week (32 hours), he is scheduled on 'Project A'.
If you opt for the first option and add a non-working exception in his profile for that particular Wednesday, his utilization report for that week will show...

John's Utilization:
Total Utilization: 32 Hours / 100%
Break-up
Project A: 32 Hours / 100 %
If you opt for the second option and schedule him a project that we have named 'Leave' on Wednesday. His utilization report for that week will show...

John's Utilization:
Total Utilization: 40 Hours / 100%
Break-up
Project A: 32 Hours / 80 %
Leave: 8 Hours / 20 %
2nd option allows organizations to generate reports on how many days/hours a resource was on leave in any duration. It also offers the flexibility to create tasks like 'Casula Leave', 'Sick Leave', 'Parental Leave', 'Annual Leave' under a Leave project to further define what type of leave is being taken, this also helps in more granular reporting.