Peer-to-peer networks function in file-sharing applications by allowing users to directly exchange files without a central server. In this architecture, each participant (or peer) acts as both a client and a server, sharing resources and data with others. This decentralized model enhances the speed and efficiency of file transfers, as it reduces reliance on any single point of access. Popular examples include BitTorrent, which splits files into smaller pieces for faster downloading. Peer-to-peer networks encourage collaboration and make accessing content more democratized.