On Shared Instances, your virtual machine (VM) shares the underlying physical host hardware (CPU, memory and network cards) with VMs owned by completely different AWS customer accounts. The hypervisor isolates your data logically, you occupy the same physical blade server as strangers.

On Dedicated Instances, your vital machine runs on physical hardware that is completely isolated at the host level. The hypervisor ensures that only virtual machines from your specific AWS account are allowed to boot up on that specific physical server rack.