The instances can be scaled and rotated in Daz, just not retextured, also if you edit the original mesh changes are made live to the instances. One thing though the instances are invisible when it comes to Dforce, you have to use the original mesh or an actual copy for it to work, A great use for it is background city scapes, load up one of the Urban Sprawl blocks and create an instance or four of the entire block. Awesome stuff.
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Good to know! For some reason I didn't think you could resize in Daz. Glad to be wrong. I programmed instances from scratch so, that makes sense. They use the same object which is loaded into video memory and just create duplicate instances of it (hence the name) as many times as you wish. This is REALLY fast as you don't have to switch objects or textures, but for the same reason, you can't change either of these things as ALL copies displayed use the same vertices and textures stored in memory and thus, changing one, changes them all where as a copy of that object takes up more memory and is physically separate in video memory.
Lots of games use them, as you said, for backgrounds. Distant trees in a 3D game are often just flat 2D billboards which always face the camera, and then instance those and you have a REALLY good space saving, speedy way to fill a forest. Just take a few different looking trees, create flat billboards (which you can do in Daz, I done it) and then instance those. I may have to experiment with creating crowds of people that way just for fun.