Difference between Database and Instance.

Oracle Database is a Physical Structure of files like Datafiles,Controlfile,Redolog files,Parameter file,Password file,Network file(tnsnames.ora, listener.ora). This files are useless until and unless we interact with them and for this we need the operating system which provides the processing capabilities as well as resources, such as memory, to read/write the data on the disk drives.

So the combination of the specific set of processes created by Oracle over the server and the memory allocated to it by Operating system is known as Instance.