The basic tl;dr: is that posts and comments are shared and copied between federated instances, which is why I’m signed into the reddthat.com instance, yet can see and interact with your post and comments on lemmy.world, and vice versa. Instances can defederate from other instances, stopping that share of information, which is typically done when an instance has objectionable content, is being swarmed by bot accounts that spam other instances, etc. For example many instances are defederated from the nsfw instances, so if you want that content, you have to make an account local to that instance, or on an instance that has chosen to stay federated with them.