Difference B/W Instance Name and Variable

This will probably be an easy question for the more experienced members of this forum to answer, but I’ve been having a difficult time distinguishing when to assign an object – say, a dynamic textbox – an instance name and when to assign it a variable using the Property Panel.

I do understand that, when said dynamic textbox nees to display data that has been created/formatted and stored to a variable using ActionScript, the textbox should be assigned the name of the aforementioned variable. Hence, its the instance names concept that confuses me.

Can someone please help me to wrap my mind around this “I’m probably making this more difficult than it should be” issue?