An object and an instance are the same thing.
Personally I prefer to use the word "instance" when referring to a specific object of a specific type, for example "an instance of type Foo". But when talking about objects in general I would say "objects" rather than "instances".
A reference either refers to a specific object or else it can be a null reference.
They say that they have to create an instance to their application. What does it mean?
They probably mean you have to write something like this:
Foo foo = new Foo();
If you are unsure what type you should instantiate you should contact the developers of the application and ask for a more complete example.