Instead each instance is responsible to create and enforce its own moderation policy. This means that two Lemmy instances can have rules that completely disagree or even contradict. This can lead to problems if they interact with each other, because by default federation is open to any instance that speaks the same protocol. To handle such cases, administrators can choose to block federation with specific instances. To be even safer, they can also choose to be federated only with instances that are allowed explicitly.
This is really what I'm not quite getting though. I understand (I think) how defederation works at a server (instance) level, but assume I call you a slur here.
The way that ☝️ is written implies that a moderator from each instance that federates with this one will need to moderate this comment separately... Which seems wasteful