One database can be attached to only one instance.

To give an bird's eye view, You have one physical server over which you install multiple SQl Servers (each of which is called an instance). You create databases in these different instances.

Normally we create multiple instances of sql server only if we have multiple sql server versions.

Eg. one for sql server 2000, another for sql server 2005..

This link will give u more description on multiple instances.

http://msdn.microsoft.com/en-us/library/aa174516(SQL.80).aspx