What is Microsoft SQL Server instance?

• SQL Server instance is a separate copy/installation of SQL Server.
• You can install multiple instances on a same machine and identify them by instance name that you select during installation (named instances).
• If you don't select custom instance name, SQL Server will be installed as a default instance (that has no name defined).
• There can be only 1 default instance (however it doesn't need to be installed if you don't want to).
• More that 1 active instance can run at a time.

When is it helpful to use multiple SQL Server instances?

• When you need to use multiple SQL Server versions side by side
• When you want to have multiple databases with the same name on one machine (for example when DEV and QA environment are running on the same box)
• When you want to isolate SQL Server instances from each other