Fly.io introduces LiteFS Cloud, a managed backup solution for SQLite databases. The company discovered an unexpected use case for its distributed SQLite database tool, LiteFS - replacing the API layer between services with SQLite databases. This approach involves shipping the entire database to clients instead of designing an API, allowing them to use vanilla SQL queries and join data as needed. While this method has limitations such as read-only access and potential security concerns, it offers benefits like moving compute to the client and providing more flexibility in querying data. The future may see companies offering per-tenant SQLite databases for their customers to improve data accessibility and performance.