In Java, an instance refers to an object created from a class. A class serves as a blueprint, while an instance is a concrete realization of that blueprint in memory. For example, if you have a class Car, you can create multiple instances of it, each representing a specific car with its own state and behavior. Instances are created using the new keyword followed by the class constructor, e.g., Car myCar = new Car();. Each instance has its own copy of instance variables defined in the class, enabling unique characteristics for each object. Instances allow classes to be used effectively in programs.