instances are just distinct servers really.

and some of them are purpose/politics specific.

From an end user perspective there's not that much to think about, thankfully.

Basically, it's like having two websites that mirror each other's content. You can sign up for Forum A and be able to read and write posts that users on Forum B can also see. People's names are tagged with the name of the forum they are registered at, but otherwise everything you do and see happens on your own site of choice and there's no difference where it comes from.

If Forum A doesn't like Forum C, but Forum B doesn't mind, Forum A can choose to disconnect from Forum C and hide their users and posts, while Forum B can still see both. It only gets tricky when someone from Forum B makes a post that people from both Forums A and C are in, but all of the posts from C users are invisible to A users.

It's like how there's loads of different email providers but they can all still email each other.

Just like Gmail can send mail to Outlook and any other @EmailProvider.com, lemmy.world can populate it's feed/comments from lemm.ee and any other @LemmyInstance.com

Most often I've seen instances use as super communities. Largely revolving around a bigger topic. KDE runs their own with their own subcommunities for instance. They are far from the only ones. Just the one I use the most and a came to mind first. Having your own instance slap server allows you far more control over your communities then just hosting on someone else's server. But from an end user perspective very largely transparent. not even being noticeable oftentimes.

I still have no clue how instances work but whatever I’m doing has been working fine for nearly a year

You have a user account "Got_Bent", on an instance (you can think of this as a "server"), lemmy.world. That's your home instance. Thus, you are @Got_Bent@lemmy.world.

You can view communities on that instance. This post, in fact, is on a community on the lemmy.world instance, !fediverse@lemmy.world.

You can also view communities on any other other instances that lemmy.world is federated with (which is most of them). For example, !unitedkingdom@feddit.uk. By-and-large, you can use them the same way you can communities on your home instance.

Reddit is pretty similar, just that with Reddit, there's only one "instance", Reddit.

Instances might go down (so users with that instance as their home instance can't log in and communities on that instance aren't accessible. Some have certain rules about what users who use that instance as their home instance can do. Others have certain rules about what communities on their instance are allowed to do. For example, my home instance, lemmy.today, wants to avoid defederating with other instances (which means that people with that home instance can see all other content). Some instances, like beehaw.org, want to keep some content that might be objectionable to their users out, and will tend to defederate with other instances if they consider them to be problematic. Some instances allow hosting communities that have pornography (like lemmynsfw.com) and some do not (like sh.itjust.works). Same thing for communities dealing with religion or extreme political views, and so on.

In general, it's helpful to have a home instance in the same rough part of the world as you, as it'll make things more-responsive.