Federation means that when anything happens on one instance (post, comment, whatever), that instance will also inform other instances of this. Which other instances? The ones that have at least one user who has indicated they are interested in that kind of activity (on Lemmy mostly: by subscribing to the community).

So already now you can see eg my instance’s copy of a lemm.ee community at discuss.tchncs.de/c/cartographyanarchy@lemm.ee and this will not disappear just because lemm.ee goes down. It’s stored in my instance’s database. But it will no longer be possible to post or comment there because that will no longer federate to other instances.

It’s not guaranteed that all of lemm.ee will be accessible elsewhere. Some communities might not have (always had) subscribers from other instances, which would mean no other database has stored those parts.