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Centralized computing is where the terminals are attached to a central computer (a terminal server) that controls all the peripherals. The terminals may be text terminals or thin clients, for example.
It offers greater security over other systems because all of the processing is controlled in a central ___location. In addition, if one terminal breaks down, the user can simply go to another terminal and log in again, and all of their files will still be accessible. Depending on the system, they may even be able to resume their session from the point they were at before, as if nothing had happened.
This type of arrangement does have some disadvantages. The central computer performs the computing functions and controls the remote terminals. This type of system relies totally on the central computer. Should the central computer crash, the entire system will "go down" (i.e. will be unavailable).
History
The very first computers did not have separate terminals as such; their primitive input/output devices were built in. However, soon it was found to be extremely useful for multiple people to be able to use a computer at the same time, for reasons of cost - early computers were very expensive, both to produce and maintain, and occupied large amounts of floor space. The idea of centralized computing was born. Early text terminals used electro-mechanical teletypewriters, but these were replaced by cathode ray tube displays (as found in 20th century televisions and computers). The text terminal model dominated computing from the 1960s until the rise to dominance of home computers and personal computers in the 1980s.
Contemporary status
As of 2007, centralized computing is now coming back into fashion - to a certain extent. Thin clients have been used for many years by businesses to reduce total cost of ownership, while web applications are becoming more popular because they can potentially be used on many types of computing device without any need for software installation. Already, however, there are signs that the pendulum is swinging back again, away from pure centralization, as thin client devices become more like diskless workstations due to increased computing power, and web applications start to do more processing on the client side, with technologies such as AJAX and rich clients.
In addition, mainframes are still being used for some mission-critical applications, such as payroll, or for processing day-to-day account transactions in banks. These mainframes will typically be accessed either using terminal emulators (real terminal devices are not used much any more) or via modern front-ends such as web applications - or (in the case of automated access) protocols such as web services protocols.
Hybrid model
Some organisations use a hybrid model halfway between centralized computing and conventional desktop computing, in which some applications (such as web browsers) are run locally, while other applications (such as critical business systems) are run on the terminal server. This is known as the hybrid client model, and one way to implement it is simply by running remote desktop client software on a standard desktop computer.