My completely unknowledgeable answer based on the week or so I've been here.
Lemmy works as a series of self hosted "instances", basically servers people run kinda like a games server or bitcoin miner.
When you join Lemmy, you picked an instance, that is the server you connect to and get all your data from, the "local" in your list.
This server then talks to and share posts with all the other servers it knows about and is connected to. That way when you query your local instance, it knows all about the other content on the other servers.
The over all cluster of various servers is the "Fediverse", various stand alone instances which share data to create the larger community.
So when the talk about defederating a site, like Threads, they mean cutting that server off from the rest of the community.
yeah, that's kinda like email.
there are multiple email providers (gmail, etc), and you can send emails to anyone even if they don't use the same provider