Also I want to know if a new instance is a vew virtual server or a completely separate computer/server. Is the creation of these instances dynamic or is it started by human beings?
Virtual: you can't have a server just for one group of players. But today's servers are very, very strong, they could already handle 100s of players five years ago, so...
Dynamic. This is basic 90's IT-technology!
Only if all the available machines are full, then they could add machines manually. But that won't happen now, with only 25% of the players left (I'm being generous with that 25%). Unless they unplugged alot of machines to lower the maintenance cost, but I would be very surprised if they already did that.