Unlike Reddit, which is a for-profit company. Lemmy servers are set up by individuals or groups of individuals for the benefit of the community at large, and donations pay for the server costs.

And I like to think of instances as countries. Each instance has its own rules and culture, and that affects how the communities are moderated. For example, the beehaw.org instance is heavily moderated compared to lemmy.world. Continuing with our example, the Technology community on beehaw.org will be moderated differently than the Technlology community on Lemmy.world.

So each instance has its own reason for existing. Another example will be https://lemmynsfw.com/ which is an 18+ instance. Basically, when you register in an instance, you become a citizen of that country.

This might help: https://lemmy.world/post/37906