An Instance Object is a clone of another Object. The contents of the Instance and its reference Object are always the same. Making changes to the reference Object will change the Instance. This feature can be used to simplify the process of making global changes to commonly used Objects within a Movie.
You can create an Instance Object using
Insert Instance or 
Make Instance, or by editing the settings of an existing Sprite and selecting a reference Object.
You can edit the setting of an Instance Object using the Sprite Panel.