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These two terms have been used frequently in virtualization. Is there a subtle difference? Or are they totally different things in the context of virtualization.
Image is static data containing the software (the OS and applications together with their configuration and data files etc) that the virtual machine will run once started. It is usually stored on disk (though you can store it anywhere you like).
Instance is a running virtual machine. It has been started from an image and it is capable of running an OS and processes, performing computations, I/O etc. Unlike static image, instance is a dynamic thing which does some work and with which you can interact.