Instances are basically a single object that can be placed multiple places. So if you want to make an office filled with chair you only need to store data for one chair, and then use that data in multiple locations.

This can make file size a bad indication of the complexity of a model. You could make a model with a million chairs, all with thousands of polygons each, but only store polygon data for a single chair and one million positions. The models polycount would skyrocket but the file size might only get a few times bigger.

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