'What does it mean to be an Instance of the Azure Active Directory?

Microsoft says, "In Azure Active Directory a tenant is an instance of Azure Active Directory that an organization receives when it signs up for a cloud application like Microsoft 365."

Could anyone explain what it means for a tenant to be an instance of the Azure Active Directory?

I know that an instance is basically a virtual machine. However, I'm failing to see how that definition applies in this particular context.

Solution 1:^[1]

In your context, Instance of Azure Active Directory means Azure tenant.

I agree with @Peter Bons, Azure tenant is a dedicated and trusted instance of Azure AD.

Tenant refers to a single instance of Azure Active Directory.
Please note that tenant will be automatically created when your organization signs up for a Microsoft cloud service subscription.
To make it simple, you can consider it as parent group that includes users and groups along with the access control to application and resources.
A tenant is associated with a single identity and can have one or several subscriptions.
Based on your requirement, you can have single tenant or multitenant.
Every tenant is linked to a single Azure AD instance, which is shared with all tenant's subscriptions.
Azure AD Tenants are globally unique and have scopes with a domain name ending with ‘onmicrosoft.com’ and has a Tenant ID in the form of UUID/GUID.