Essential oils are made by distilling plant parts, either the leaf, twig, root or flower. Citrus oils, sometimes called EOs, are actually made by squeezing the rind until the fragrant oil is collected.
Fragrance oils are made from petroleum extracts, from coal tar, in a laboratory. Sometimes a bit of EO is added for depth of scent.
Some incenses use EOs, some use FOs. If it's a fruity or "theme" scent like raspberry, rain, china musk, peach, it's probably a FO. EOs are more expensive than FOs, and their use in incense is limited. You'd have to ask the manufacturer if they use only EOs. EOs are used in home fragrance usually by having a tea light "burner" or an air diffuser with a pad that gets a few drops of the oil placed on it and the air blows the fragrance out into the room. This gives a very clear, clean scent with no smokey scent.
EOs never turn into fragrance oils, two completely different things. You should only buy EOs from trusted suppliers that list common name, botanical name, country of origin, and other important information, like safety data, or have the extra information like safety data on their website. Don't trust most of the health food store EOs, they've sat on the shelf a long time under poor storage conditions. You can find out more about good supplies at the groups listed.