In short: the web server issues a unique identifier to each visitor on his first visit. The visitor must bring back that ID for him to be recognised next time around. This identifier also allows the server to properly segregate objects owned by one session against that of another.
If load-on-startup is false:
If load-on-startup is true:
Once he's on the service mode and on the groove, the same servlet will work on the requests from all other clients.
Why isn't it a good idea to have one instance per client? Think about this: Will you hire one pizza guy for every order that came? Do that and you'd be out of business in no time.
It comes with a small risk though. Remember: this single guy holds all the order information in his pocket: so if you're not cautious about thread safety on servlets, he may end up giving the wrong order to a certain client.