Ohh, you're basically creating an account on one email provider but trying to login via another.
The "community" is like "subreddit", and "instance" is like "reddit", but instead of simply walled up, it's like reddit able to visit and comment on another reddit-lookalike, but still have to sign up on reddit itself.
once you have subscribed to enough communities, if you go to lemm.ee and change the tab from local to subscribed, it will populate the page with posts from all the communities you have subscribed to, just like the home tab in reddit, except the posts will be from various instances and servers. You can upvote and comment and post in those communities but still through your one lemm.ee account instead of many accounts in many instances.