It'll click for you soon. It's essentially a bunch of individually owned boards like reddit that are all interconnected. You can see posts from all the instances, and if you don't like the posts in one instance - you can block it or filter it out.

What made it “click” for me was when someone explained it like email addresses. You can send emails between Gmail and Yahoo Mail just fine, and two email addresses with the same username are distinguished by their @ handles. So like “Example@gmail(dot)com” is a different address than “Example@yahoo(dot)com”. They’re entirely separate accounts that can send emails to each other.

The fediverse is very similar. My account @lemmy.world is separate from the same username on another instance. And the same goes for communities. There may be communities on certain instances that naturally grow and absorb the smaller ones, but there’s nothing stopping you from making your own identical community on another instance, with its own rules, moderators, and content.

Federation is simply the process of connecting two servers together. The same way gmail and yahoo can talk to each other via a standard protocol, federation allows the different servers to talk to each other. This occasionally causes weird things when one instance federates with another, and you suddenly get flooded by posts from that new server. But that’s just your Home feed catching up, since all of those posts are now considered unread.

Federation isn’t an automatic process in the sense that new servers announce themselves and get connected automatically. Instead, federation happens when a user from one instance tries to interact with another instance. For example, maybe you have a community over in @examplecommunity(dot)com. The first time you (as a Lemmy(dot)world user) try to interact with that examplecommunity server, the two will federate and begin the process of sharing posts.