Okay, I'll give you a practical example. Here is an excerpt from the book Blockchain Revolution.

"bAIRBNB VERSUS AIRBNB

bAirbnb is a distributed application (DApp), a set of smart contracts that stores data on a home-listings blockchain. The bAirbnb app has an elegant interface: owners can upload information and pictures of their property. The platform maintains reputation scores of both providers and renters to improve everyone’s business decisions.

When you want to rent, the bAirbnb software scans and filters the blockchain for all the listings that meet your criteria (e.g., ten miles from the Eiffel Tower, two bedrooms, four-plus star ratings only). Your user experience is identical to that in Airbnb, except that you communicate peer to peer on the network, through encrypted and cryptographically signed messages not stored in Airbnb’s database. You and the room owner are the only two people who can read these messages. You can swap phone numbers, an exchange that Airbnb blocks to preserve future revenues. On bAirbnb you and the owner could communicate off-chain and complete the transaction entirely off-chain, but you are better off completing the transaction on-chain for a few reasons.

Reputation: Because the network records the transaction on the blockchain, a positive review from each user improves your respective reputations. The risk of a negative review motivates each party to remain honest. Remember, people with good reputations can use the same persona across multiple DApps and benefit from continuity as a good person.

Identity Verification: Because we are not dealing with a centralized system that checks ID on our behalf, each party needs to confirm the other party’s identity. The blockchain calls up a contract from a “VerifyID” application, one of many contracts that bAirbnb, SUber (blockchain Uber), and other DApps use to verify real-world identity.

Privacy Protection: VerifyID doesn’t track and store all transactions in a database. It simply returns a TRUE or FALSE when it receives a request for verification of a public key (persona). Different kinds of DApps can call VerifyID, but VerifyID never knows details of transactions. This separation of identity from activity greatly improves your privacy. Risk Reduction: Home owners currently store customer identities and financial data on their own servers, which can be hacked and leaked, exposing owners to litigation and large liabilities. On the blockchain, you needn’t trust a vendor with your data; there is no central database to hack and leak. There are only individual peer-to-peer pseudonymous transactions.

Insurance: Today Airbnb offers $1 million insurance for owners and compensates them for theft and damage. On bAirbnb, owners can get the bAirbnb insurance DApp. Renters with good reputations like you have lower insurance rates and needn’t subsidize renters who lack caution, scrutiny of prospects, or poor treatment of property. When you submit a booking request, bAirbnb sends your public key (persona) to the insurance contract for a quote. The insurance DApp contacts a list of trusted providers; fake insurers need not apply. Insurers perform their own calculations in real time through autonomous agent software based on the inputs to the contract—such as the market value of the owner’s house, how much the owner wants insured, owner reputation, your reputation as a renter, and rental price. bAirbnb takes the best bid and adds it to the nightly fee the owner wants to charge. The blockchain processes this calculation in the background; owners and renters have a comparable user experience to that of Airbnb but a superior and more equitable value exchange.

Payment Settlement: Of course, on the blockchain, you transfer funds to the owner in seconds, not days as with Airbnb. Owners can manage security deposits more easily with smart contracts. Some parties use escrow accounts to release payments partially (nightly, weekly, hourly, etc.) or in full as the parties agree. In disputes involving smart contracts, parties can call for arbitration.

Property Access Using Smart Locks (IoT device): A smart lock connected to the blockchain knows when you have paid. When you arrive, your near-field communication-enabled smart phone can sign a message with your public key as proof of payment, and the smart lock will open for you. Owners need not drop keys off to you or visit the property unless they want to say hello or address some emergency.

You and the owner have now saved most of the 15 percent Airbnb fee. Settlements are assured and instant. There are no foreign exchange fees for international contracts. You need not worry about stolen identity. Local governments in oppressive regimes cannot subpoena bAirbnb for all its rental history data. This is the real sharing-of-value economy; both customers and service providers are the winners."

Essentially, it can turn any centralized middleman system, which are most companies in the world today, into decentralized ones, where the processing happens not on central servers but in the decentralized network.