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A central challenge in hypothesis testing (HT) lies in determining the optimal balance between Type I (false positive) and Type II (non-detection or false negative) error probabilities. Analyzing these errors' exponential rate of convergence, known as error exponents, provides crucial insights into system performance. Error exponents offer a lens through which we can understand how operational restrictions, such as resource constraints and impairments in communications, affect the accuracy of distributed inference in networked systems. This survey presents a comprehensive review of key results in HT, from the foundational Stein's Lemma to recent advancements in distributed HT, all unified through the framework of error exponents. We explore asymptotic and non-asymptotic results, highlighting their implications for designing robust and efficient networked systems, such as event detection through lossy wireless sensor monitoring networks, collective perception-based object detection in vehicular environments, and clock synchronization in distributed environments, among others. We show that understanding the role of error exponents provides a valuable tool for optimizing decision-making and improving the reliability of networked systems.