Instance Management is the name for a set of techniques used by WCF to bind client requests to service instances, governing which service instance handles which client request. This is a service side implementation detail.
In WCF, Instance Management is a technique to decide which service instance will serve a client request. It also decides when a client request will be served by a service instance. Instance Management is a very important factor when designing a service. Its affects:
Scalability of Service
Performance of Service
Durability of Service
Transactions
Service Queues
Instance Management can be seen as a set of techniques to decide which service instance will serve a client request and when.