Federation is the reason I’m allowed to comment on this post, even though I’m on sh.itjust.works and not kbin.social

It simply means that the instances (different websites) are connected, and you can see content from any that are federated as well as create posts or comment anywhere.

Defederation is the opposite. That is your site deciding that you’d rather not have you, or any users on your instance, see or interact with other instances.