To use a different analogy from the commonly used email one, think of each instance as a country.

You are in your country, but that doesn't mean you can't hear about stuff from other countries.

Sometimes though, a country does something bad and becomes embargoed by your country. If this happens you can't hear about stuff from the country your country is embargoing.

By default you can hear about stuff from all countries (federation)

A country can become embargoed (defederation)

In each country, there are towns. And towns in different countries can have the same name. When you're looking at all the countries together this means you might want to listen to London UK and London USA.

A town can be considered a community in Lemmy, which is a subreddit in Reddit.

I just made this up so there's likely to be some flaw in the analogy but I think it helps give you a good sense.