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Centralized computing is computing done at a central location, using terminals that are attached to a central computer. The computer itself may control all the peripherals directly (if they are physically connected to the central computer), or they may be attached via a terminal server. Alternatively, if the terminals have the capability, they may be able to connect to the central computer over the network. The terminals may be text terminals or thin clients, for example.
It offers greater security over decentralized 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).
Another disadvantage is that central computing relies heavily on the quality of administration and resources provided to its users. Should the central computer be inadequately supported by any means (e.g. size of home directories, problems regarding administration), then your usage will suffer greatly. The reverse situation, however, (i.e., a system supported better than your needs) is one of the key advantages to centralized computing.