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An instance is the (executed) Oracle software (Oracle processes) and the memory they use (SGA). It is the instance that manipulates the data stored in the database.
System identifier (SID)
A SID identifies an instance.
This name is (usually on Unix) stored in the environment variable $ORACLE_SID.
In Windows, the SID can be entered into the ORACLE_SID.
Starting an instance
An instance can be started using the SQL*Plus startup command.
When an instance is started, it reads a file with instance configuration parameters from either the init.ora file or the spfile.