There’s a variety of reasons.

1. instances are communities, some more loose than others
2. some instances have themes. lemmy.world is general, aussie.zone welcomes anyone but it’s mostly Australians or friends there-of. Having a user name/address like vvilld@aussie.zone says something about you.
3. some instances have ideological alignments, lemmy.ml are tankies
4. some instances de-federate from others, like hexbear is not federated by some / many instances.
5. the “local” feed can be like a set of subscriptions or curated content. slrpnk.net is the best example I can think of for this, mostly environmentally conscious tech, and renewables, et cetera.
6. some admins turn out to be idiots. In the early days there was some support from admins of specific / niche instances for bots re-posting content from reddit.
7. there’s no good reason not to have multiple accounts. In my own case I change instances regularly. IDK why exactly, I just actively avoid allowing my account to become some kind of extension of my identity.