Modern distributed and networked systems are highly heterogeneous in many dimensions, including available bandwidth, processor speed, disk capacity, security, failure rate, and pattern of failures. The theme of this dissertation is that this heterogeneity can not only be handled, but rather should generally be viewed as an asset.

We begin by introducing a framework, the price of heterogeneity, to model the effect of heterogeneity in parallel and distributed systems. Our results in this framework show broad classes of systems in which heterogeneity cannot be a disadvantage. We then develop practical methods for distributed systems to adapt to and take advantage of heterogeneity. The Y^0 distributed hash table achieves improved load balance, route length, and congestion with low overhead in environments with heterogeneous node capacities, such as bandwidth or processing speed. Addressing heterogeneity in reliability, we show that randomization in node selection strategies typically reduces failure rates --- a property that permits better understanding of subtle properties of existing systems, as well as the design of new systems. Finally, we study how to improve stability in the Internet's interdomain routing protocol, while carefully managing tradeoffs with network operators' perferred routes. These results show how both performance and reliability can be improved in heterogeneous environments.