The difference between the Edit Instance and a Play Instance of an Area, is that in a Play Instance no changes to instances, area settings or anything else are persisted to the database.
There can be any number of Play Instances of an Area running (limited by your hardware cluster resources). Each is an independent copy. Anything can change in the Play Instance, but no changes to the area will be saved to the database.
How Play Instances are managed is controlled via HSL (see: Using $WORLD to Spin Up an Area). So you can have common areas, or instanced dungeons, or any other scheme that makes sense for your game design.
All actual gameplay takes place in Play Instances of Areas. Any changes to the area that you want to persist, have to be coded to do so in HSL. The State System can be very helpful in this.
To tell if you are in a Play Instance or not, look in the lower righthand corner of the screen to see if it has a number indicating a play instance, or the word "(EDIT)", indicating an Edit Instance.
A play instance will have the instance number in parentheses next to it.
An edit instance will say (EDIT) next to it.