Terminologhy & Architecture
Database - A collection of physical operating system files.
Instance - A set of Oracle processes and an SGA.
The database may be mounted and opened by many instances.
An instance can have only 1 database associated with it at any point in time but a database can have many instances.
In its simplest form Oracle has a large chunk of memory called the SGA and a set of processes attached to this SGA. In Windows the individual processes are replaced by a single thread (within this we can see the individual threads using tlist, from the windows resource toolkit).