The Mastodon network is made up of individual servers, called Instances. If we use our email analogy; think of Mastodon as email as a whole. So if Mastodon is “email”, then an Instance would be an email provider. For example, Gmail, Fastmail, or Office 365. They’re all completely different servers that are run by completely different companies or people, but Gmail, Fastmail and Office 365 can all send email to one another.
I like this analogy from this excellent guide by Kev Quirk.