A fault domain (FD) is an area of coordinated failure. FDs are not restricted to a rack of servers. Several other factors are considered while composing a fault domain such as connection to the same ethernet switch and connection to the same power supply. When you provision a Service Fabric cluster on Azure, your nodes are distributed across several Fault Domains. At runtime, the Service Fabric cluster resource manager spreads replicas of each service across nodes in different fault domains so that failure of a node does not bring down the application.

Service Fabric's cluster resource manager prefers to allocate replicas of your service in a balanced tree of fault domains so that failure of a particular domain does not cause failure of the application. The following is a representation of an imbalanced and a balanced domain configuration:

Note that in the imbalanced domain configuration, the extreme right domain may bring down the application if it contains all the replicas of a service. This is something that you don't need to be worry about if you are deploying your cluster in Azure, but something that you need to be aware of when you are deploying your cluster on premises.