Welcome! It's pretty easy actually.
Everyone with a little bit of technical knowledge can set up their owner server, also called an "instance".
Users sign up for a instance and get access to the communities created on the instance they signed up for but also to the communities of other servers because they can communicate with each other.
The big advantage is that it's not a walled garden. Unlike reddit where one company controls everything, if someone here we're to pull a "Spez" (what Reddit did) they would be laughed out of the room because each server is owned independently.
Currently there's two popular softwares to run these servers: Lemmy and Kbin. But that's just a program that server owners run. I believe there's currently over 300 servers that are running one of these softwares to create this distributed social network.