Everything on lemmy is synced (federated) to all other subscribing instances.

That is how i am currently reading/commenting on this post. I am interacting with the synced copy of the post and comments which was sent to my instance. As well- you are interacting with the copy which was sent to your instance.

I could technically flip a few values in the database and tell my instance that this is a local community, and I would then be able to manage it as such.