Definition - What does Server Instance mean?
A server instance is a collection of SQL Server databases which are run by a solitary SQL Server service or instance. The details of each server instance can be viewed on the service console which can be web-based or command-line based. The instances are not linked with each other and can be controlled or managed separately.
Techopedia explains Server Instance
Each SQL Server instance has its own ports, databases and logins. The instances can be further categorized as named and primary instances. While the user can access the named instances by using a backslash and the name of the instance, the primary instances can be accessed by their IP addresses or server names. For example, if the user wants to connect to an instance called XYZ on the local server, the following command or syntax can be used: 22.214.171.124XYZ.
Multiple server instances provide multiple advantages such as stability and backup for the computing systems. Such computing systems can transfer the load in case of unprecedented issues such as data loss or system crashes. In such cases, the other instances can take up the work of the affected instances. Starting with SQL Server 2005, the user can run up to 50 instances, all of which can run at the same time.