Question

Is a Dalvik virtual machine instance created for each application, or all Android applications share the same Dalvik virtual machine instance?

Answer 1

From the developer docs:

Every Android application runs in its own process, with its own
instance of the Dalvik virtual machine. Dalvik has been written so
that a device can run multiple VMs efficiently.

The Dalvik VM executes files in the Dalvik Executable (.dex) format
which is optimised for minimal memory footprint.

The VM is register-based, and runs classes compiled by a Java language
compiler that have been transformed into the .dex format by the
included dx tool.

Also have a look at What is… The Dalvik Virtual Machine for detailed description about DVM.