To my understanding, it gets deleted in that instance, but a portion of it may be preserved if another instance that is federated already holds that data.
Two things: the data on the instance will be gone.
The posts/comments that were replicated on other instances will stay, but they will be defederated, meaning they will not ever be synced up woth other instances' replications of these posts/comments. Every instance will just have their own, insular copy.