Distributed databases are systems where data is stored across multiple sites or nodes, which communicate over a network to present functions as a single entity. Distributed databases offer improved performance through fragmentation and parallelism, scalability by adding processing capabilities and storage capacity, reliability through replication, transparency by hiding internal mechanisms from users, and ease of integration with applications. They are used in data-intensive endeavors such as fraud detection systems, real-time analytics, and facial recognition. The characteristics of distributed databases include reliable and consistent data storage, efficient query execution, security features, a unifying API for easy integration, and cost optimization capabilities. Distributed databases provide advantages over centralized databases by overcoming scale and processing limitations, eliminating single points of failure, and offering transparent access to data.