dump-all-databases.sh

#!/bin/bash
# Daniel Verner
# CarrotPlant LLC
# 2011
# Backup each mysql databases into a different file, rather than one big file
# Optionally files can be gzipped (dbname.gz)
#
# Usage: dump_all_databases [ -u username -o output_dir -z ]
#
#	-u username to connect mysql server
#	-o [output_dir] optional the output directory where to put the files
#	-z gzip enabled
#
# Note: The script will prompt for a password, you cannot specify it as command line argument for security reasons
#
# based on the solution from: sonia 16-nov-05 (http://soniahamilton.wordpress.com/2005/11/16/backup-multiple-databases-into-separate-files/)


PROG_NAME=$(basename $0)
USER=""
PASSWORD=""
OUTPUTDIR=${PWD}
GZIP_ENABLED=0
GZIP=""

MYSQLDUMP="/usr/bin/mysqldump"
MYSQL="/usr/bin/mysql"

while getopts u:o:z OPTION
do
    case ${OPTION} in
        u) USER=${OPTARG};;
        o) OUTPUTDIR=${OPTARG};;
        z) GZIP_ENABLED=1;;
        ?) echo "Usage: ${PROG_NAME} [ -u username -o output_dir -z ]"
           exit 2;;
    esac
done

if [ "$USER" != '' ]; then

echo "Enter password for" $USER":"
oldmodes=`stty -g`
stty -echo
read PASSWORD
stty $oldmodes

fi

if [ ! -d "$OUTPUTDIR" ]; then
    mkdir -p $OUTPUTDIR
fi

# get a list of databases
databases=`$MYSQL --user=$USER --password=$PASSWORD -e "SHOW DATABASES;" | grep -Ev "(Database|information_schema)"`

# dump each database in turn
for db in $databases; do
    echo "$db"
	if [ $GZIP_ENABLED == 1 ]; then
		$MYSQLDUMP --force --opt --user=$USER --password=$PASSWORD --databases "$db" | gzip > "$OUTPUTDIR/$db.gz"
	else
	    $MYSQLDUMP --force --opt --user=$USER --password=$PASSWORD --databases "$db" > "$OUTPUTDIR/$db.sql"
   	fi
done

i think that it might be simply a case of quoting ("$db") everywhere, in your case.

@anarcat Updated the gist. Thanks!