how??

I predict that you're under 13.
But anyways, an instance is an entity that contains a vmf with unfilled parameters, such as the color, speed, disabled or enabled, outputs.
To make an instance, start with a vmf you want to make an instance, then make a proxy for the instance, name the proxy and put the proxy in a parameter of the entity, save as a vmf, and done, you have an instance.

Works for making other instances besides what is done here.Just the basics

http://www.youtube.com/watch?v=iK12GRu5EFU

well first your prediction is wrong and im fairly new to map making, but thank you any way for the help.

I'd suggest to save all your instance-vmf files in portal 2/sdk_contents/maps/instances/-yourname- that way it's always easy to find your own instances

I suggest you'd first read every article on this page. Then if you don't understand something, try to Google it, and if all else fails - ask here. It's some basic guidelines of forums all across the inter-webs...

P.S. - You can reach the wiki from the "Portal 2 Mapping Wiki" link on the top of the page (the grey bar)

Just to say it a little bit simpler: an instance is a pre-made "map" you put in your map. An instance is made so complicate elements in your map is ready, and all you have to do is paste it.

I make an instance by pressing "new map" and when I'm done I just save it at the instance folder. What makes it an instance is that I use func_instance to have it in my map, isn't that right?

yup, thats the gist of it. you can also send it inpits and outputs and change parameters if you set it up to do so.