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I just want to clarify if there is a difference between the two terms. Right now we are actually planning to use database mirroring and I've been encountering the following sentences

  • databases must reside on different server
  • databases must reside on different server instances

is there a difference?

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Yes. One server can have multiple instances installed at the same time (even of different versions, like 2008 and 2012) as long as their "name" is different (Which you set at install).

Basically this allows you to have multiple different installations at one server.

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There is just a little difference. The "different server" is a different physical machine (which makes sense when using mirroring for high availabillity) The "different server instance" is another installation of the SQL Server software which can be located on the same physical box (not helpfull for mirroring imho).

Eg. the default instance will be on port 1433 with a name of MSSQLSERVER. You would connect via management studio just with the DNS name of the server. Every next instance will needs to have a different port to use and will also get a different instance name, eg. BACKUPSERVER. You will connect with management studio to this with DNS name of the server plus instance name, eg. SERVERNAME\BACKUPSERVER.

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Not a bad answer but if we're being precise: "different server" is a different physical machine - cough Virtualisation cough –  RobM Jul 5 '12 at 8:00
    
Yes, Thanks @DJ Pon3. I missed that. –  Mr.T Jul 5 '12 at 15:54
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