This is the 13111th most frequent Russian word.
медалями
The word "медалями" is the instrumental plural form of "медаль," meaning "medals" (used with or by medals).
Here, 'медалями' is the instrument (an instrumental case) with which the wall is decorated.
Мы украсили стену медалями.
We decorated the wall with medals.
In this sentence, 'медалями' refers to the medals that are the object of pride, expressed as instrumental providing detail about the pride.
Он гордился своими медалями за заслуги.
He was proud of his medals for merit.
Here, 'медалями' is used to describe the object being waved as an action performed by the children, expressed in the instrumental case.