From a technical standpoint, there is no real difference, it comes down to how the instance owner feels it's best to run the server.

Ultimately, instances (or at least the ones most people want to join) want to keep rulebreakers, trolls and spam out. There are two main ways of doing this:

• Proactively: By attempting to prevent bad actors from signing up in the first place.
• Reactively: Allow everyone to sign up, and ban bad actors when they misbehave.

Of course, there is a lot of debate as to which of these methods are better (beehaw, for example, fundamentally doesn't think a reactive approach can work at all), which causes tension between some instances.

This tension can rise to a point where one instance "defederates" from another, meaning they stop talking to each other and you can't interact with one if you have an account with the other.