They don't understand or at least the current implementation states as much.

You have to first pick a server to join, then join that server. Once in, you're typically presented with local server content only. To see federated content, you have to select "All". Same story with looking at communities. Local first, All by selection only.

You then have problems with the style of Federation. If I create a community one Lemmy instance called tech then you create the tech community on another, we now have two tech communities separate from each other. Given your default community view is local, this presents a problem. You've already got a lemmy.ml technology community along with a beehaw.org technology community. It can quickly spiral into a mess of unintentional duplication.

Absolutely. It's why I haven't really cared about Mastodon. I'm an engineer and it absolutely seems like a correct approach to me but it's never going to appeal to the general public outside of engineering-adjacent crowds.

Exactly, barrier to entry is way high at the moment.