This paper focuses on simultaneous estimation of states and faults for a linear time-invariant (LTI) system observed by sensor networks. Each sensor node is equipped with an observer, which uses only local measurements and local interaction with neighbors for monitoring. The observability of said observer is analyzed where non-local observability of a sensor node is required in terms of the system state and faults. The distributed observers present features of $H_{\infty }$ performance to constrain the influence of disturbances on the estimation errors, for which the global design condition is transformed into a linear matrix inequality (LMI). The LMI is proven to be solvable given collective observability of the system and a suitable $H_{\infty }$ performance index. Moreover, in the case that no disturbances exist, fully distributed observers with adaptive gains are designed to asymptotically estimate the states and faults without using any global information from the network. Finally, the effectiveness of the proposed methods is verified through case studies on a spacecraft’s attitude control system.