Managing an instance can come with a lot of work and maintenance, so some instances are crowdfunded to help defray the costs of full time management of a particular instance.
Anti-abuse tools give users the ability to better block people as well as instances have the ability to block incoming messages from entire instances. Thus an instance that serves as a haven for Nazis could be completely blocked by one or more other instances which prevent their users from seeing any content from all users on an instance that is a "bad actor."
Governments could block instances based on their IP addresses, but would have to do some work to block all instances (primarily by knowing where they all are).
One can join as many instances as they'd like, but it would likely become confusing after a while. Ideally one should be able to join just one instance and be able to follow or be followed by anyone from any other instance. Some communities have particular sets of rules they expect their users to abide by. Some may be centered on particular topics of discussion as well. Some instances are individually run and have only one user.