Magazines (kbin) and Communities (Lemmy) are the naming conventions for the group type of posts offered - like subreddits. Magazines and Communities are effectively the same thing, just different naming conventions from their different backbone software running on the instance.

Instances are the full server in which the communities and users are held. Like sh.itjust.works is an instance - it’s the page where you can log into in order to then interact with anything both housed within your instance as well as the greater fediverse (barring any defederated instances, as you mentioned).