The PDF instance menu is where all the versions of your PDF exist. As you can see below, there will often be a variety of versions all with different collaborators and sets of annotations.
The first version, shown by the sheet of paper icon is the local version of the PDF. Annotations made here will only be shown to you and allows you to make personal annotations to a shared document.
The second instance, indicated by the Google Drive icon is a shared Google Drive file, available for all users that it has been shared with. This is the most effective way for collaborative annotations to be viewed and provides the most comprehensive security and privacy controls.
The final version is the web version of a PDF; this tends to be a publicly available file that is accessed from another site and will allow you to share annotations with anyone else who has the file.