Android SQLite Databases (Explain Like I'm Five)

I'm trying to use SQLite Databases, but as I'm learning (via the internet), I'm getting really confused and I have a few questions.

1. Where is the data actually stored? For example, let's say I want a database that stores all the usernames and all the passwords for everyone who uses my application. I need to write this information onto the database, but where is it? Is it on the user's phone? Is it on the web somewhere? Whenever the user goes onto the app, I need to read from the database. Does it read from somewhere online or does it only read from the database created on the user's phone? Is there any way to create a static database that all users are able to write to?
2. If I'm using a SQLite Database to store username and passwords, do I need to secure it with a password? If so, how? I've read on some websites that this information can easily be read if it isn't secured with a password, but others tell me that it can only be accessed by my application.