I live in Las Vegas, so I have some first-hand experience with living in the desert.
Firstly, as was pointed out, the image of deserts as vast expanses of sand dunes is only true for a small fraction of deserts. Dune formation requires exactly the right wind and environmental conditions. There are some small dunes about a bit over a mile from where I live, but the great majority of the ground is covered by dirt and gravelly rocks. Evaporation basins covered with salt and minerals are common, particularly here in Nevada where there are a lot of valleys which the water cannot flow out of. There are also a lot of mountains and hills around here, and some really spectacular limestone and sandstone rock outcrops.
There are a lot of plants about, but no "ground cover" plants like grasses or ferns; most native plants around here are small bushes with thin, spiky and waxy leaves (to minimize water loss and to be less appetizing) and rather dense growth to shade the roots systems as much as possible. The plants tend to be fairly widely spaced apart (6 feet or more). As you climb up into the mountains, you get very noticeable changes in plants, with the appearance of Joshua trees, and then eventually pine trees of various types in the mountains. There aren't that many cacti around here, but that's because this is the wrong type of desert for them (there are several distinctly different groups of desert vegetation found in the southwest US).
Water comes from 4 main sources (and this is true of most deserts). Rivers running through the desert, like the Nile and the Colorado, are the most reliable sources, and the most likely places where you will find permanent settlements with agriculture. You also get some springs and oases which provide year-round water, or can sink wells to an underground water-table (Las Vegas is where it is because there are some springs, and has been able to grow as much as it has because it is close to the Colorado). Hills and mountains get more rain, because air rising over them gets cooled and can't hold as much moisture, and so you get temporary creeks running off the mountains; and if the mountains are high enough they may be permanent. Finally, during the summer, you sometimes get warm, (comparatively) moist monsoon winds blowing up (or down) from the tropics; they bring scattered thunderstorms during the summer to some parts of the desert (we get a few here in Vegas, but they're much more common further south in Arizona). When it does rain, flash flooding is common, as a lot of water can be dumped in a very small area.
Deserts tend to occur in the "rain shadow" of major mountain ranges and in belts north and south of the equator. Mountain ranges squeeze moisture out of the air, so areas beyond mountain ranges in the direction of prevailing winds are often much dryer. Also, on Earth at least, air heated at the equator rises high into the atmosphere, dropping its moisture as it rises, and then this dry air drops back down as it circulates to higher latitudes and cools. This dry air creates two bands of desert areas north and south of the equator: the American deserts and the Sahara are at roughly the same latitude north as the Australian deserts are south. Similar processes cause cold deserts in the high Arctic and Antarctica. Deserts can also occur, or be enlarged, by human (or monster) activity, particularly anything which removes large amounts of vegetation.
Most of the large animal life around Las Vegas lives in the hills and mountains, or near permanent water: chipmunks, rabbits, desert tortises, coyotes, bighorn sheep, mountain lions, burros, and so forth. Outside these areas animal life tends to be small. Large animals need sufficient plant life and water to survive, and the bigger the animal, the larger the area it needs to support itself. People who lived here tended to be nomadic and range over fairly wide areas, but there were notable exceptions, such as the Pueblo cultures (look for information on Mesa Verde, for example).
Hopefully, this gives you an idea of how real world deserts work. That said, fantasy worlds can work any way you want. All deserts could be vast expanses of sand in your world. Maybe deserts are areas that were cursed by the god of rain or are vast battleground wastelands from some past magical war. Maybe magical plants can squeeze moisture out of the air, or even create it. Magical creatures may be able to survive without water at all. Large-scale irrigation becomes more reasonable if you have access to spells like move earth, and create water can overcome a lot of the problems of long desert journeys. Divination spells could tell you exactly where to sink your wells or when to plant your crops to take best advantage of sparse rains.
In D&D you could have desert cultures ranging from hunter-gatherers eking a frugal existence from a harsh land; through bedouin-like goat and sheep herders wandering from oasis to oasis; or a civilization clustered around a major river flowing through the middle of a desert; all the way to a culture which uses high magic to make the desert bloom. Playing with races could add different twists: maybe the hunter gatherers are wild elves; perhaps the herders are kobolds who watch over their flocks of giant lizards; maybe the civilization is dwarven and pumps water from a river deep in the underdark.
You could get ideas from the old Dark Sun and Al Qadim settings for 2nd edition. You might also get ideas from settings involving the underdark, since there are a lot of general similarities: resources tend to be located in distinct pockets separated by miles of inhospitable terrain.
You might also consider the effects that other fantasy elements could bring. Fleets of flying ships could make trade in the desert significantly easier, as could underground highways, or systems of portals. Flying islands could follow storms and rain, making sure that they were well-watered.
I've probably rambled enough. I hope this gives you some ideas.
Corran