How can that happen? I thought each instance was governed and... stored(don't understand lemmy) by its own admin.

Cross Instance manipulation seems antithetical to the decentralized nature of Lemmy.

How does their instance reach over and change another instance?

That feels like it blurs the lines of what federation should entail

There's nothing stopping you from modifying your server software to change the behaviour. For instance you could implement a feature where instead of just removing the posts of banned users from other instances, you could put them into a moderation queue to be approved/rejected by an instance admin or the community moderator.

I could see this happening again. Admin takes work. If you trust another instance admin, you might replicate their ban actions automatically. Done in the name of efficiency, but has the potential for abuse and mistakes.