Host computers are are broken down into instances. Instances of what ?
If you are talking about the Elastic Cloud Computing service (EC2), you rent Computer recourses (CPU, RAM, hard drive) as an instance because there are multiple running instance of a physical server. AWS use containers to provide the instance to consumers so each instance has a well definited memory space. In some case you could need a private computer to run very sensitive data or program license, in such case you can use a dedicated instance that will have its proper server and where the physical hardware is not shared with others.