The Fediverse (a portmanteau of “federation” and “universe”) is an ensemble of federated (i.e. interconnected) servers that are used for web publishing (i.e. social networking, microblogging, blogging, or websites) and file hosting, but which, while independently hosted, can communicate with each other. – Fediverse, on Wikipedia
Decentralisation using ActivityPub and other protocols (OStatus, Diaspora) for social media allows people to all follow each other across servers (much like a centralised solution) but each with their own moderators (much unlike a centralised solution). That is, you always have your individual tools to mute and block other individuals, but in addition to that, you have more far ranging tools. As an individual, for example, you can block an entire instance. As an individual, you can report posts to your instance’s moderators, or to the moderators of the originating instance. Thus, every instance can develop its own culture, and that’s why blocking on the instance level starts making sense.
One problem of decentralisation is that new nodes have difficulties getting started. More: Fediverse decentralisation problems.