Ok in terms of technical terms an instance is a particular website running a particular fediverse software i.e. lemmy.ca, thelemmy.club, piefed.social.

A community is the name for a "subreddit" of which any given instance hosts many (and different instances can have communities about the same thing, which happens with bigger topics sometimes).

The names... aren't ideal but also you don't need to remember any of this really.