Good question. LiteFS is just a replication layer so it's probably better to answer your question just from a SQLite standpoint. One of the biggest limitations of SQLite is that it only allows a single writer at a time so you can't have long-running write transactions in your application. Writes can be incredibly fast though—sometimes a millisecond or less depending on your hardware and settings. Speaking of which, make sure you use the "WAL" journaling mode if you're using SQLite it improves concurrency & write performance.
There are also differences once you get to a large scale. Many databases support compression whereas SQLite does not so it might get expensive if you have terabytes of data. That's an extreme case though.
Ultimately, SQLite is just a database. It's more similar to Postgres & MySQL than it is different. There are some features that those client/server databases have like LATERAL joins but I feel like SQLite includes the 99% of what I typically use for application development.
For compression and encryption, commercial SQLite extensions are available - https://sqlite.org/support.html ... I also recall coming across some free open source projects that had implemented compression and encryption for SQLite databases though I have no idea if they were production ready.
There are also differences once you get to a large scale. Many databases support compression whereas SQLite does not so it might get expensive if you have terabytes of data. That's an extreme case though.
Ultimately, SQLite is just a database. It's more similar to Postgres & MySQL than it is different. There are some features that those client/server databases have like LATERAL joins but I feel like SQLite includes the 99% of what I typically use for application development.