Two key terms that you will hear used a lot once you start working with Oracle are instance and database. These terms have very precise meanings in the Oracle world.

Oracle uses the term database^[1] to refer to the collection of files that contain your data. This includes datafiles, redo logs, and control files. You learned about these files in the previous module.

Oracle uses the term instance^[2] to refer to the processes and memory structures that exist when an Oracle database is open and in use. These processes perform tasks such as writing changed data back to the datafiles, writing the redo log, and archiving filled log files.
An analogy that I often use to illuminate this concept is to compare Oracle to Microsoft Word. An Oracle database is analogous to a Word document. It is a collection of files containing data. The Oracle instance could be compared to the Microsoft Word application program. In order to do something with your Word document, you need to start Word and open the document. The same applies to Oracle. To do anything with an Oracle database, you need to first start an instance. Once you have an instance running, you can open a database and perform the desired tasks.

A database server is the key to information management. In general, a server reliably manages a large amount of data in a multiuser environment so that users can concurrently access the same data. A database server also prevents unauthorized access and provides efficient solutions for failure recovery.

An Oracle database server consists of a database and at least one database instance (commonly referred to as simply an instance). Because an instance and a database are so closely connected, the term Oracle database is sometimes used to refer to both instance and database. In the strictest sense the terms have the following meanings:

A database can be considered from both a 1) physical and 2) logical perspective.
Physical data is data viewable at the operating system level. For example, operating system utilities such as the Linux ls and ps can list database files and processes.
Logical data such as a table is meaningful only for the database. A SQL statement can list the tables in an Oracle database, but an operating system utility cannot. The database has physical structures and logical structures. Because the physical and logical structures are separate, the physical storage of data can be managed without affecting access to logical storage structures. For example, renaming a physical database file does not rename the tables whose data is stored in this file.

[1] Database: A database is a set of files, located on disk, that store data. These files can exist independently of a database instance.

[2] Database instance: An instance is a set of memory structures that manage database files. The instance consists of a shared memory area, called the system global area (SGA), and a set of background processes. An instance can exist independently of database files.