Instance dungeon
In MMORPGs, an instance dungeon is a special area, typically a dungeon, that generates a new copy, or instance, for each group that enters the area. This ensures that there will never be competition (kill stealing, spawn camping) over mobs within the instance and that player characters receive a minimum of lag. Instance dungeons may contain stronger than usual mobs and sought-after equipment.
Games that have been known to use instancing include The Realm Online, EverQuest, Anarchy Online, City of Heroes, Everquest2, World of Warcraft, Dark Age of Camelot and Guild Wars. This last one uses instancing extensively to help make the product free of monthly fees.
A game known for not using this definition of instance dungeon is EVE Online. EVE Online does create an instance for a player accepting a mission, giving a location and bookmark to the target. However this players mission occurs in the same world, allowing others to interact with the player regardless whether or not they are in the same gang. The player is not isolated in an instance (or copy), although there may be several players doing the same mission, these mission will occure at diffrent locations in eve, although most often in the same system.
The use of instancing is a hotly debated topic among the MMORPG industry. Brad McQuaid wrote an article on the topic that can be found here: Brad McQuaid on Instancing.