It typically doesn’t. But some instances do defederate with some others, though it’s rare. Lemmygrad.ml, for example, is a “tankie”-oriented instance. A lot of instances don’t get along with it and have defederated from it. Your home instance is lemmy.world, and if you look here:
Click on the “Blocked Instances” tab to see a list of instances that lemmy.world has defederated from.
You’ll notive that lemmygrad.ml is on that list, so you won’t see any content from that instance.
I’ve used them happily from a policy standpoint, but in past months, they’ve had some real load problems, where the instances has been unresponsive. I’m pretty sure that a lot of it is due to scraper-bots pulling material for AI training — I understand that this has been a serious problem for the Web as a whole, and particularly for forum sites, including the Threadiverse, and is why many Threadiverse instances have stopped allowing anonymous login in past months. Lemmy.today was a holdout, but finally also disabled anonymous login. However, I just tried it today and while it seemed fine for a while, I also saw an unresponsive episode, so I don’t know if they may still have other load issues to iron out.