Database: A collection of physical operating system files(data files,temporary files,redo log files,control files) or disk.
Instance: A set of Oracle background processes/threads and a shared memory area,which is memory that is shared across those processes/threads running on the single computer. A database instance can exits without any disk storage whatsoever.It might not be the most useful thing in the world,but thinking about it that way will definitely help draw the line between the instance and database.
At any time,an instance will have only one set of files associated with it.