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.