How does Lemmy connect to the rest of the Fediverse?

Not an expert, but what I've pieced together over the past year:

ActivityPub platforms work on a subscribe-and-wait model, similar to a magazine or newspaper subscription. You find an 'actor' on another server you want to receive content from and you follow them. This sends a signal to your server that you want to see that actor's posts in your streams, and if your server is not currently receiving content from that actor, then it should request that the actor's host server send any posts they publish along. Your local server then stores and hosts those posts locally, as if they had originated from the server (but with pointers back to the original host, so that replies can be forwarded back to the original poster).

These actors can be other users, or they can be groups (which is what Lemmy communities are), which work by receiving posts addressed to them and then forwarding them along to subscribers.

Your local server infrastructure may allow you to subscribe to users, or to groups, or to both. And they may play host to users, or to groups, or to both. Lemmy hosts both users and groups, but only allows users to subscribe to groups. Friendica and /kbin host both users and groups, and allow users to subscribe to both. Mastodon hosts only users, but allows users to subscribe to both users and groups. And Guppe and Chirp host only groups.