So, Lemmy isn’t a single monolithic thing like say Twitter or Facebook. Lemmy is more like the old usenet or like email where you have a bunch of individual servers each with their own users and communities, they just talk to each other seamlessly allowing any user on a given Lemmy server to participate in any community on any Lemmy server. This is what they mean by “federation”, it’s the mechanism by which this kind of decentralized system functions.

Defederating is essentially when a server blocks another server from being federated with it - if VLemmy defederates from Burggit (which is what was proposed) then VLemmy users will not be able to see or participate in any community or with any user on Burggit and Burggit users will not be able to see or participate in any community or with any user on VLemmy.

Blocking/filtering is just marking the communities in question as “I don’t want to see this” and not having to see it ever again, or doing likewise but from the main new/all/hot feeds. The idea I support is letting the server admin for each server set a default list of blocked communities that can be overridden by each user if desired. Keeps the benefits of federation while giving users the most power to tailor their experience and also allowing server admins to curate the default experience