It’s the same difference as the one between Reddit = instance and a subreddit = community:
instance - a platform hosted somewhere. It has its own users, communities, admins.
community - it’s a space for a topic inside an instance. It has local moderators, that must abide to the rules of the admins of that instance, and may set up their own rules.
The big difference here is that instances can communicate with each other. For example: you’re a user of the instance lemmy.fmhy.ml, you’re posting in a community from lemmy.world, and I’m replying to your post from lemmy.ml. There’s nothing remotely similar in Reddit.
It’s the same difference as the one between Reddit = instance and a subreddit = community:
The big difference here is that instances can communicate with each other. For example: you’re a user of the instance lemmy.fmhy.ml, you’re posting in a community from lemmy.world, and I’m replying to your post from lemmy.ml. There’s nothing remotely similar in Reddit.