Substitute "copied" for "instanced." In LDoN, if two groups move into the same zone, two different copies are generated, one for each group. Neither group sees the other in its copy, and spawns, loot, etc. are generated on a per-group basis. E.g., if group 1 kills big_bad_monster in the group 1 instance, that has no effect on the copy of big_bad_monster in the group 2 instance, which is under the sole control of group 2. Similarly, if group 1 sees big_bad_monster (named) and kills it to loot phat_lewt, there's no guarantee that group 2 will get the same phat_lewt from big_bad_monster, or that big_bad_monster will even appear in group 2's instance.
The same thing happens if you go into the same Lost Dungeon adventure with two different groups: you'll see a different instance each time (i.e., a new copy is created on the fly for your group the first time you enter, and it disappears/becomes inaccessible 30 minutes after your time expires or you beat the adventure).
Some GoD zones are similarly instanceable.