Hey Tommyjoking,
great question and as you can imagine, not so quiet easy to explain when avoiding to go too deep into the real physical, i.e. the quantitative details behind the phenomenon.
However...
In each kind of Laser-Welding or Cutting application in the field of metallic materials there is, as comparable with arc-welding, being a Plasma induced - the so called "Laser-Induced Plasma".
The behaviour and - in particular - the reasons for the physical generation of this plasma is indeed not as easy to explain in a few simple words.
Basically it has strongly to do with the grade of absorption the base material (in your case stainless steel) shows for the used Laser (in your case a CO2-Laser having a wavelength of 10.6 µm). The higher the Laser-Radiation is being absorbed by the base-materials surface the earlier the temperature - as a function of the amount of absorbed Laser-Radiation - is being risen. Higher grades of surface roughness of the base material can improve the grade of absorption up to a specific limit. Here one has also to consider that different Laser-Types - having different wavelengths - affect the grade of absorption. Solid State Lasers e.g. a Neodym Yttrium Aluminum Garnet Laser (Neodym YAG) have lower wavelengths (1/10 of a CO2-Laser) and having higher grades of absorption compared with a CO2-Laser up to a specific level.
When the Laser-Radiation (which is, just as you have mentioned, nothing else than light, but a "special" one) is being absorbed by the base materials surface it comes to an interaction with the base metals particles - otherwise you could not weld or cut, respectively. The height of this interaction depends on the energy density of the beam which is again a function of the focusing or the focal diameter, respectively. Therefore - in dependence how strongly the Laser-Beam in diameter is being focused or even defocused - one can distinguish between different modes of transferring the Laser's energy into the base metal. When using a more defocused Laser-Beam (having a larger diameter and thus a lower energy density) one can use the Laser in the so called "Conduction-Mode" which means the heat transfer mechanisms are widely comparable to e.g. an arc, which is having also a more or less low energy density compared to the beam processes (Laser- or Electron Beam). When having an as far as possible small focal point the energy density increases and the depth of fusion is rising by forming a "vapour hole" which is called the "keyhole" as well, and thus the mode for energy input is called the "Keyhole-Mode".
The background of the keyhole can be described simply by the following. Each material can be vaporized when a specific power density is exceeded (~ > 10^6 W/cm^2). Then again the grade of absorption is being increased drastically and the keyhole can be created followed by a deep penetration into the z-direction (depth) of the workpiece. Due to the small diameter of the deep keyhole (~ the diameter of the Laser-Beam) and the metal vapour the keyhole is filled with, the grade of atomic interaction is increased i.e. the Laser energy exploitation is increased and an ionisation of the metal vapour can occur. This again means nothing else as that the electrons are no more stringently bonded to the atomic nucleus and can freely interact - just comparable to an arc-plasma. The "gas" within and outside the keyhole is now electrically conductive. And also just comparable to the plasma of an arc, by "falling back" onto lower energy levels the difference in energy is set free by emitting photons or "light". As you certainly will know, the "colour" of an arc is depending amongst others also on the amount of the different vaporized elements. In case of a having a "Laser-Induced Plasma" and welding iron based materials (steels) the colour of the plasma is "blue". Another interesting example. When using "easy ionisable" working gases like Argon or Nitrogen in Laser-Processing one can often observe a plasma being formed additionally to the blue metal-vapour plasma. Often those induced "working gas plasmas" are having a more reddish colour and can even be adhered when removing the workpiece and only using the Laser-Beam alone!
By the way, the Laser-Induced Plasma is often unwanted since it can reduce the depth of penetration significantly and can destabilize the welding- or cutting process.
You know I am proud of being an arc-welder and I am honestly no "Laser-Expert" (although I love the physics behind the beam processes) but so far my humble try of an explanation of what you have observed.
Other appreciated fellows may have better ones.
Best regards,
Stephan