We have Lemmy.world, Lemmy.ml, beehaw.org, I think even yiffit.net. If I log in using wefwef it asks me where I want to login. And when I make a new account using another instance, it says ”… Lemmy is federated, so you can interact with everything on lemmy.ml even if you’re registered on a different instance.“ So if I’m registered on lemmy.world, how can I interact with lemmy.ml?
Another way of looking at it is cross platform videogames where Kbin.social is playstation Lemmy.world is xbox and a third one would be Nintendo Switch. If the game has a chat feature what one person posts from xbox would appear for the playstation players and visa versa. Federating is basically when they first connect to each other to become multi platform.