The hierarchy is thus cloud-based data centers-> host computers-> instances (virtual machines).
Consider an example of understanding each term. Consider a public cloud, such as AWS or the Google App Engine, each cloud will have many data centers in different geographical locations, where there will be many servers, computers, data storage disks, etc. And other hardware components that are needed to provide Cloud Services.
Each data center will have a group (cluster) of dedicated equipment that provides specialized services or processes, and they are known as hosts.
The type of instance determines the hardware of the host computer used for your instance. Each instance type offers different computational, memory, and storage capabilities and is grouped into instance families based on these capabilities. Instances are a kind of virtual environment that is used to launch a user process or application.
Whenever a user wants to use a particular service or wants to deploy a specific application in the cloud, the user needs to create an instance of this particular type.
For more information, see the following links for aws: http://docs.aws.amazon.com/AWSEC2/latest/UserGuide/instance-types.html
For the Google Cloud Platform: https://cloud.google.com/appengine/docs/java/how-instances-are-managed