I can’t help but feel like it lacks some level of transparency to how it works?

I agree, which is actually kinda funny since it's open source. The documentation helps some, but it's a LOT of reading to do, and it still leaves a new user like me with questions- and I'm a software developer, with more technical knowledge than most. I have a feeling that someone without that technical background would find this VERY confusing to understand at a fundamental level.

The big question that I still have, that should be readily apparent but isn't: if I subscribe to a community that's hosted on another instance, can I still post/like/comment there? I just tested it- you can. I notice now that the guide says:

Lemmy will then fetch the community from its original instance, and allow you to interact with it.

I think they could make it a lot clearer for a casual user if they reworded the "following communities" section to name it something like "joining communities," and re-worded the first paragraph to something like this:

After logging in to your new account, its time to follow communities that you are interested in. For this you can click on the communities link at the top of the page (on mobile, you need to click the menu icon on the top right first). You will see a list of communities which can be filtered by subscribed, local or all. Local communities are those which are hosted on the same site where you are signed in, while all also contains federated communities from other instances. You can also find more communities by going to the Lemmy Community Browser. You can join communities from any instance, regardless of which instance you created your account in, and once you've joined you can like, comment, and post in those communities.