A distributed database is a collection of logically interrelated databases distributed over a computer network. It uses a distributed database management system (DDBMS) to manage the distributed database and make the distribution transparent to users. There are two main types of DDBMS - homogeneous and heterogeneous. Distributed databases improve availability, scalability and performance but introduce complexity in management, security and consistency compared to centralized databases. Transaction management and recovery are more challenging in distributed databases due to potential failures across multiple sites.