An instance is not federated with another until the first link is initiated manually. After that, they can talk to each other.
This is why if you are browsing a curated list of instances/communities on some website, and then go to search for them on your current instance, sometimes they don’t show up, and you have to paste the full link in the search bar and wait for it to “find” it. You are initiating its federation.
So, no, this is not all instances. Some are still yet to be discovered by yours.
This “unlinked” state is different from being blocked, because a blocked instance is actively forbidden from being federated with your server. It can’t talk to you even if it wants to, and you can’t talk to them either. A total disconnect.
If you make your own instance you’ll probably have to manually connect to some others to start with. Following people helps, because it adds any servers that they follow too.
I literally vibrate with glee whenever there’s a thunderstorm lol