Observability in distributed systems is crucial for identifying and resolving performance issues, especially when dealing with multi-layered architectures that can complicate bug detection. Distributed tracing, a key component of observability, offers a comprehensive view of how requests traverse various microservices, allowing for detailed performance analysis by tracking the lifecycle of requests and interactions between components. While distributed tracing is resource-intensive and may impact performance, it can be efficiently managed by sampling traces and prioritizing critical services for monitoring. Open standards, like those outlined by OpenTelemetry, and tools such as Jaeger and Zipkin, support effective tracing implementation. Though challenges exist, such as adapting legacy systems, a strategic approach can enhance system reliability and facilitate faster issue resolution. Integrating distributed tracing with other observability pillars—logs, metrics, and security—provides a holistic view of system operations, as demonstrated by platforms like Coralogix.