Instances A, B, and C are federated initially. When a user posts on Instance A, users on Instances B & C can see and interact with the post directly. Any comments they make will be sent back to Instance A as the "home" instance for that content.
Now let's say Instance A decides they don't care for the type of interaction they're getting from Instance C's users and decides to block - or defederate - Instance C.
To users on instance A, nothing changes other than new posts and comments from users on Instance C will no longer show up. To users on Instance B, nothing changes other than new comments from users on Instance C won't appear in posts they interact with on Instance A. However, for Instance C, things are suddenly branched.
On Instance C, any posts that were created prior to defederation still exist in Instance C's record. However, any comments that users on Instance C commit to those posts will no longer be distributed to users on Instances A or B, because Instance A maintains the "primary" record of the post. Similarly, Instance C's users will not receive updated comments from users on Instance A OR Instance B, because again, Instance A is what determines which comments appear in federated instances. Furthermore, new posts created on Instance A will no longer show up in users' feeds on Instance C. From the moment of defederation, Instance C's copies of all posts on Instance A are now distinct, and the only new comments or updates they will receive will be from local users on Instance C.