If the admin of an instance A defederates instance B, all users on instance A will no longer see instance B.
However, other instances (like for example instance C) will still see the comments/users from instance B.
The user being able to block instance B will no longer see anything from that instance B but all other users on instance A will keep seeing all from instance B. It is a personal instance block after all
This is how I understood the user instance blocking and it kinda aligns on how I think the fediverse works. But I could be wrong.