A fault domain is a grouping of hardware and infrastructure within an availability domain. Each availability domain contains three fault domains. Fault domains provide anti-affinity: they let you distribute your instances so that the instances are not on the same physical hardware within a single availability domain. A hardware failure or Compute hardware maintenance event that affects one fault domain does not affect instances in other fault domains. In addition, the physical hardware in a fault domain has independent and redundant power supplies, which prevents a failure in the power supply hardware within one fault domain from affecting other fault domains.
Usually fault domains to do the following things:
1) Protect against unexpected hardware failures or power supply failures.
2) Protect against planned outages because of Compute hardware maintenance.