@indigo Think of email. We all either host our own email servers or use one that someone else hosts. We may have multiple email accounts. And, yet, we can all communicate with one another.
Why would you choose one email server over the other? Maybe you don't like your ISP. Maybe you don't trust Google, Yahoo, or some "large entity" to keep your data private and/or to use your data against you. Or you want something that is independent of your ISP.
Mastodon works exactly the same way as email in these cases. I can be on one instance because I like the rules or community that has formed there, you can be on another that has different rules and a different community, and yet we can still interact across these instances.
// @larand