First of all, you need to be aware of the difference between database instance and SQL Server instance - both frequently referred to as just "instance" - a cause much confusion on a regular basis.

The term database instance is most frequently used in connection with Oracle. Basically, a database is what's written in physical files on disk, while an instance is what runs in memory on a specific computer at a specific time. Your database instance exists only temporarily - it will disappear completely if you shut down your computer, stop the related service or detach the database. But the database itself should never be in any danger of disappearing permanently - making sure of that is your number one job as a DBA.

Now, as I mentioned, the term database instance is most commonly used in relation to Oracle.

When we talk about an instance, we usually mean a SQL Server instance, which is a specific installation of SQL Server. When people are not aware of these things, it can cause a lot of confusion and a lot of waste as people go about installing new SQL Server instances where really all they need is a new database.