The balloons float in random directions and will explode if the protagonist gets too close, much like a proximity mine. They appear on the HUD like a grenade would. These can kill Nicholas Raine in 2-3 blasts on Nightmare difficulty.
The best way to get rid of a Balloon Bomb is to shoot it, which will cause the bomb to fall down and explode. When it falls down, it kills anything that's underneath it, including the Jackal Clan members, which can be used to the player's advantage.
These bombs can also be avoided by running through the areas they appear before they float up to that area.