Hi @Madke_Tejashree,

The best way that I can explain this is that service brokers use DLL files that you run through the K2 service type. After you create your service type, you can create a service inststance for the service type. As for a service instance, its more like a tool to make a connection to whatever you need it to connect to (a service type, for example, an sql database to create an advanced smartobject. Please have a look at these videos:
How-To: Registering and using a Custom Service Broker

How-To: Creating a Service Instance

Kind Regards

Prineel