Imagine you're at a convention or something similar. A huge building with lots of rooms, inside those rooms lots of tables, and at those tables, lots of people. You enter a room: At table A they are playing a board game, at table B they're discussing a rulebook, at table C they're in a heated argument about spaceships. You like it here, so you dump your backpack and jacket at one of the tables - this is your seat now.

But you're not confined to that room - you're free to wander the entire convention scene, regardless of which room you use as your "base", and other people are free to do the same. You can join discussions at any table in any room for as long as you like, and people who dumped their stuff into other rooms are free to visit yours.

The tables are communities ("subreddits"), the rooms are instances, and the building is the Federation. It doesn't matter much which "room"/instance you want to take as your base, since you'll have access to the same content in the entire building anyway.

The room / instance mostly doesn't matter for the site content, but might matter when something doesn't work as intended - if lemmy.world is down for maintenance for example, people are temporarily unable to access that instance, but can still browse the rest of the Federation. For the convention example, it's like someone dropped a bottle in the room and everyone has to stay outside for a while until the janitor has mopped it all up. You can still visit all tables in other rooms in the meantime, since a temporarily inaccessible room is no reason to shut down the entire convention.

Plus, if you're unhappy with your room for any reason, noone is stopping you from taking your backpack to a different room and find a new chair to leave it on. There is no limit on how often you can create new accounts on different instances if you like their site layout better (content is still the same tho) or something similar.

To compare it all to reddit: Reddit is a convention held inside a gym. Still a building full of tables, but they're technically all in the same room, so if something goes wrong inside that room, EVERYONE has to stay outside of the building, no matter where your seat is.

...at least that's how I understand it ;) I've been here for 2 months now, also ex-redditor. And yes, I've been super confused about it all for the first two weeks or so as well, but it gets better on its own the more you interact with the site. Support is super helpful and friendly, too.