When you call it, "Instance of a Scene" are you just saying that the original file stays the same but the player.tscn file that was added into the workspace is what becomes an instance and is what actually becomes changeable?
That's right, an instance is a duplicate that doesn't change the original.
It's a bit more than that since when we change the original, the duplicate syncs with the original to reflect the changes. For example when adding a new node to the original, it will appear in the "instance of a Scene" as well.