When I was using Mastodon, the local timeline was almost exclusively what I was paying attention to. It was a really nice small community of people.

One thing that might not be obvious is that the All feed is different too, as it only shows posts from communities someone on the instance has subscribed to. But since there are ways to search communities across instances, it isn’t really a big deal. Unless you’re on an instance of one or two people maybe.

Federation and moderation are probably where the instance matters most. Also, the matter of who runs the instance is kind of important considering stability and longevity of the instance. (mine for example will probably be gone within a month once I break something)

I think it’s worth mentioning the amount of instances full of bots as well. I just started hosting my own instance and decided to check other instances’ block lists to defederate from at least some bot instances. I now have about 50 blocked instances. (instances with 60k or so users each with no posts)