An Instance Object is a clone of a Sprite Object. The contents of the Instance and its reference Sprite are always the same. Making changes to the Instance will change the reference Sprite and vice versa. This feature can be used to simplify the process of making global changes to commonly used objects within a Movie.
You can create an Instance Object using 
Insert Instance or 
Make Instance, or by editing the settings of an existing Sprite and selecting a reference Sprite.
You can edit the setting of an Instance Object using the Sprite Panel.
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