Database: A collection of physical operating system files or disk. When using Oracle 10g Automatic Storage Management (ASM) or RAW
partitions,the database may not appear as individual separate files in the operating system, but the definition remains the same.
Instance: A set of Oracle background processes/threads and a shared memory area, which is memory that is shared across those threads/processes running on a single computer. This the place to maintain volatile, nonpersistent stuff (some of which gets flushed to disk).A database instance can exist without any disk storage whatsoever. It might not be the most useful thing in the world, but thinking about it that way will definitely help draw the line between the instance and the database.
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