Yea unfortunately the nature of Federation means that instances (servers) are dissociated from each other but nonetheless communicate with each other via a standardized protocol. Consequently, there is nothing stopping one instance from saying they want to stop communicating with another instance
In some situations that makes sense. For example, if you are running an instance and don’t want to get people/content from another instance that posts incredibly hateful messages, you can choose to defederate from that instance.
In other situations it creates complications. For example, if you are on a somewhat popular instance (like Lemmy.world) but then get defederated from an instance you want to participate in (like Beehaw.org), even if the defederation came from justifiable reasons, you will need a Beehaw account in order to view that content as you won’t be able to access new content from Beehaw.org using your Lemmy.world account.
For the most part, in pragmatic terms what this really means is if one wants to participate in the most active instances, they’ll probably want an account on an instance that federates with the biggest instances.