All participating instances have a bot that subscribes to participating communities from the other instances. This makes it so a community is federated over to all participating instances.

Example: You create !ask_kemmy@lemmy.com and around 70 bots from other instances then subscribe to it. Now users on those 70 other instances sees the community and subscribes themselves. The bots see this and they unsubscribe because their work is done.

I see you're on aggregatet.org, which I never heard about. FediDB says it has 10 monthly active users.

If you were to create a community on your instance, only people on your instance could see it. No one on other instances will be aware of it. And any posts made to it would not leave your instance.

For your community and posts therein to federate to other instances, the community needs to be subscribed to from them. You would have to constantly advertise it everywhere to make people aware that it exists, because the likelihood that someone visits your instance and stumbles on it is way too small. It won't show up on their instance if they search.

With Lemmy Federate, you can give it your community, and it will attempt to subscribe to it from all the instances that have signed up with Lemmy Federate. That way your community appears on those instances when people search for it, and posts you make to the community will federate there.