Ground coffee must be steeped in heated water to leach the coffee from the beans. The grinds are separated from the liquid and the liquid is served coffee.
Instant coffee is that steeped liquid which has been freeze dried. Adding water dissolves the granules and makes coffee.
They are generally not interchangeable in recipes. For example if you used instant coffee in a coffee-crusted prime rib recipe, the instant would dissolve on the meat. If you used ground coffee in a dessert calling for instant, you would have a mouthful of coffee grounds in every bit.