Prelude> let fac n = if n == 0 then 1 else n * fac (n-1)
How does it know to stop ?
When fac is called with n=0 it returns 1 and stops the recursion.
and why does fac 2.5 hang?
fac, as you defined it, is only defined for integers. As you repeatedly subtract 1 from n you will never get to 0 (you will get to 0.5 and then -0.5) and thus the recursion will never terminate.\