How will DeFi work?

Can you elaborate on how DeFi, or Decentralized Finance, will operate in practice? I'm particularly interested in understanding how it differs from traditional financial systems and what mechanisms it employs to ensure security, transparency, and accessibility. Additionally, how will DeFi facilitate peer-to-peer transactions without intermediaries and what role will smart contracts play in this process? Lastly, what are some potential challenges and limitations of DeFi that investors should be aware of?