Colocated tables are a feature in YugabyteDB that allows storing small datasets on the same tablet, reducing query fan-out and boosting performance. By default, all tables in a database are stored on the same tablet, but large tables or tables with high write throughput can be opted out of colocation. This results in improved performance for queries involving joins and subqueries across related tables. The feature is particularly useful for small datasets that require high availability or geo-distribution, as well as for applications with a large number of databases and inter-related tables. By colocating these datasets on the same tablet, YugabyteDB reduces the overhead on clusters and improves query performance. Overall, colocated tables provide a convenient way to optimize database performance without compromising scalability.