Q:

What are the advantages of using a single database for EACH client? 

In a database-centric application that is designed for multiple clients, I've always thought it was "better" to use a single database for ALL clients - associating records with proper indexes and keys.   In listening to the Stack Overflow podcast, I heard Joel mention that FogBugz uses one database per client (so if there were 1000 clients, there would be 1000 databases).   What are the advantages of using this architecture? 
I understand that for some projects, clients need direct access to all of their data - in such an application, it's obvious that each client needs their own database.   However, for projects where a client does not need to access the database directly, are there any advantages to using one database per client?   It seems that in terms of flexibility, it's much simpler to use a single database with a single copy of the tables.   It's easier to add new features, it's easier to create reports, and it's just easier to manage. 
I was pretty confident in the "one database for all clients" method until I heard Joel (an experienced developer) mention that his software uses a different approach -- and I'm a little confused with his decision...
I've heard people cite that databases slow down with a large number of records, but any relational database with some merit isn't going to have that problem - especially if proper indexes and keys are used. 
Any input is greatly appreciated! 

A:

Assume there's no scaling penalty for storing all the clients in one database; for most people, and well configured databases/queries, this will be fairly true these days.  If you're not one of these people, well, then the benefit of a single database is obvious. 
In this situation, benefits come from the encapsulation of each client.  From the code perspective, each client exists in isolation - there is no possible situation in which a database update might overwrite, corrupt, retrieve or alter data belonging to another client.  This also simplifies the model, as you don't need to ever consider the fact that records might belong to another client. 
You also get benefits of separability - it's trivial to pull out the data associated with a given client ,and move them to a different server.  Or restore a backup of that client when the call up to say "We've deleted some key data!",  using the builtin database mechanisms. 
You get easy and free server mobility - if you outscale one database server, you can just host new clients on another server.  If they were all in one database, you'd need to either get beefier hardware, or run the database over multiple machines. 
You get easy versioning - if one client wants to stay on software version 1.0, and another wants 2.0, where 1.0 and 2.0 use different database schemas, there's no problem - you can migrate one without having to pull them out of one database. 
I can think of a few dozen more, I guess.  But all in all, the key concept is "simplicity".  The product manages one client, and thus one database.  There is never any complexity from the "But the database also contains other clients" issue.  It fits the mental model of the user, where they exist alone.  Advantages like being able to doing easy reporting on all clients at once, are minimal - how often do you want a report on the whole world, rather than just one client? 

A:

Here's one approach that I've seen before:

Each customer has a unique connection string stored in a master customer database. 
The database is designed so that everything is segmented by CustomerID, even if there is a single customer on a database. 
Scripts are created to migrate all customer data to a new database if needed, and then only that customer's connection string needs to be updated to point to the new location. 

This allows for using a single database at first, and then easily segmenting later on once you've got a large number of clients, or more commonly when you have a couple of customers that overuse the system. 
I've found that restoring specific customer data is really tough when all the data is in the same database, but managing upgrades is much simpler. 
When using a single database per customer, you run into a huge problem of keeping all customers running at the same schema version, and that doesn't even consider backup jobs on a whole bunch of customer-specific databases.  Naturally restoring data is easier, but if you make sure not to permanently delete records (just mark with a deleted flag or move to an archive table), then you have less need for database restore in the first place. 

A:

To keep it simple.  You can be sure that your client is only seeing their data.   The client with fewer records doesn't have to pay the penalty of having to compete with hundreds of thousands of records that may be in the database but not theirs.   I don't care how well everything is indexed and optimized there will be queries that determine that they have to scan every record.