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Jordan Eldredge AFAIK, the lists are private. They serve one particular purpose: You can choose to read toots from only a subset of those whom you follow. Other projects have something similar with the extra bonus of being able to choose to send a message to only those on a particular list. I think the aspects on Diaspora* have this, I know that the privacy groups on Friendica and Hubzilla have this.
Choosing a particular Mastodon instance isn't anything like curating a list. It's more like a permanent virtual meeting-point, like, to stay with the musicians example, a pub where musicians meet and chat and socialise, just without concerts or jam sessions. You know from somewhere that this particular pub is a popular hangout for musicians, and you're a musician yourself, so you go there to meet other musicians.
Think of the local timeline as a table where a bunch of musicians are already sitting and chatting.
Of course, you may decouple them. You may even set up your own single-user instance and rely on hashtags to a) find like-minded people and b) be found by like-minded people in return. But that'd defeat the purpose of themed instances.
And there aren't only instances based on interests (just look at all the furry instances or all the manga/anime instances), but there are also instances based on physical location. For example, even some German cities have their own, albeit unofficial, instances. If you live there, you can join that particular instance and meet other people living in the same city more easily because you can count on the vast majority of users on that particular instance living in that city, too. Of course, you don't have to do that if you prefer to keep secret where you live.
Another advantage is that people having something in common sharing an instance themed with what they have in common have a kind of safe haven. The grid owner is one of them, and if there are moderators, these moderators are of their own kind, too. Instance policies are likely to be adapted to the theme so that fending off haters is easier and more efficient.
This is not only of importance for certain fringe hobbies/interests (especially the furry fandom; on furry instances, the owner and founder is a furry, and all mods are furries), but also for oppressed minorities like BIPOC or LGBTQIA+. You can be sure that the moderation on an instance run by and for BlackTwitter refugees is much faster and more eager to fend off aggressive racists than on a general instance.