What is the purpose of de-coupling capacitor and its effectiveness in a circuit?

How should i house de-coupling capacitors while building a circuit, should they be kept close or far from each other? How do they affect the overall performance?

That's a pretty broad question. The proximity to each other is not the question, decoupling caps want to be as close as possible to the pin they are decoupling. If the pins are far apart, then the caps will be far apart, if the pins are close together, the caps will be close together.

What do you mean "How do they affect the overall performance"? They could have negligible effect, or they could make the difference between your circuit working or not working. The question is meaningless.

I suspect you need to educate yourself about the whole concept of decoupling- why you do it, how to do it, etc.

Decoupling caps perform several functions, which may vary from circuit to circuit. They can prevent local transients from propagating to the rest of the system by providing a "local" power source. They can protect a device from noise from other parts of the circuit. Etc.

The purpose of decoupling capacitors is to make a HF
"short circuit" across the power rail(s) of a device, that
can "soak up" transient current demand. In order for
this to happen, inductance must be minimized which
means that loop area for the current path through the
device and the capacitors must be minimized. That
means putting the caps as close to the device as you
can. Also, that the internal inductance and resistance
should be driven down by selection, although you can
run into problems with too much Q in some cases; one
of those "good problems to have" since it can be fixed
by using a cheaper part.