I don’t think a hug was a good example, for the exact reason you mentioned in the second half of your comment. A hug does not cost anything to give, other than a small amount of time. Everyone gets time for free, until they don’t anymore.

Servers cost money AND time, both to get and run the equipment. Not to mention regular maintenance as hard drives especially don’t last forever. It’s easier to do something unprofitable for the sake of it being a valuable thing, such as picking up trash on the side of the road. But most people can’t just give shoes to the homeless because it’s a good thing, simply because that costs money and time, which the average person does not have an exorbitant amount of money to give away.

To me, the question is moreso how do lemmy instances get the money to exist, and OP just used the wrong word. Which as you mentioned, through donations. I also think it would be a pretty neat feature to have a setting where you can enable ads (off by default) to further support the instance without having to directly enter your credit card information.