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Instance: You create an instance of software by executing the software's setup or install procedure. You can also create an instance of software by duplicating an existing instance. An instance of software is the set of files that make up the software, stored in executable form and ready to be run.

Examples:
* An installed copy of Windows Server 2003 on a hard disk is an instance of Windows Server 2003.
* An installed copy of Exchange Server within a VHD (or other image format) file is an instance of Exchange Server.
* A VHD file with Exchange Server installed on top of Windows Server 2003 contains an instance of Windows Server 2003 and an instance of Exchange Server. Copying that VHD file will create another instance of Windows Server 2003 and another instance of Exchange Server. Deploying that VHD file to another server will create an instance of Windows Server 2003 and an instance of Exchange on that server.

Changes in Use Rights for Windows Server 2003 R2 Editions
Running the software versus installing and using the software

Previous server license requirements for Windows Server 2003 products were based on the number of installations of the product on a server. License requirements for the software are now based on the number of instances of server software that you “run” on a server. Each software license now specifies the number of instances of software that you may run on a particular server at a time, rather than the number of copies of the software that you may install and use on that server.

Windows Server 2003 R2 Enterprise Edition Use Rights

Microsoft has added two important licensing benefits to Windows Server 2003 R2 Enterprise Edition. First, under a single license on a server, you may run up to four instances of the server software in virtual operating system environments on that server (only one instance per virtual operating system environment). Second, if you are licensed for Windows Server 2003 R2 Standard Edition, you may run an instance of Standard Edition in place of Enterprise Edition in any of those virtual operating system environments. Customers will find key benefits in licensing Windows Server 2003 R2 Enterprise Edition as their virtualization platform but may still need to run Windows Server 2003 R2 Standard Edition within the virtual machines. Microsoft has enabled this scenario as a significant benefit to licensing Windows Server 2003 R2 Enterprise Edition.