Isn't one a subset of the other? A system with federation must have multiple instances, but a system with multiple instances doesn't need to federate (in the sense of information passing between independently managed instances.)
Yes. My original question was whether federation is necessary for the kind of communities Mastodon serves, not whether the web must have multiple websites.
Different instances can also have different rules, different moderation and different federation.
Edit: and exist in different legal jurisdictions, and also be harder to ban or regulate.