An instance variable in Java is a variable that is specific to a certain object of a class. It is declared within the curly braces of the class but outside of any method, constructor, or block. The value of an instance variable can be changed by any method in the class, but it is not accessible from outside the class. Each instantiated object of the class has a separate copy or instance of that variable. Instance variables are usually initialized when the object is created, and they can be accessed directly by calling the variable name inside the class. Access modifiers can be given for instance variables, and the instance variables are visible for all methods, constructors, and blocks in the class. The advantages of using instance variables in Java include providing privacy and security for the data contained within them and making it easy to track state changes within an object, as each instance variable will keep track of its changes.