In this paper, we address distributed hypothesis testing (DHT) in sensor networks and Bayesian networks using the average-consensus algorithm of Olfati-Saber & Murray. As a byproduct, we obtain a novel belief propagation algorithm called Belief Consensus. This algo- rithm works for connected networks with loops and arbitrary degree sequence. Belief consen- sus allows distributed computation of products of n beliefs (or conditional probabilities) that belong to n different nodes of a network. This capability enables distributed hypothesis testing for a broad variety of applications. We show that this belief propagation admits a Lyapunov function that quantifies the collective disbelief in the network. Belief consensus benefits from scalability, robustness to link failures, convergence under variable topology, asynchronous fea- tures of average-consensus algorithm. Some connections between small-word networks and speed of convergence of belief consensus are discussed. A detailed example is provided for distributed detection of multi-target formations in a sensor network. The entire network is capable of reaching a common set of beliefs associated with correctness of different hypotheses. We demonstrate that our DHT algorithm successfully identifies a test formation in a network of sensors with self-constructed statistical models. [PDF]