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Let us first examine the entry point of Application and a Dynamic Link library.
Application WinMain() entry point


HINSTANCE hPrevInstance,
LPSTR lpCmdLine, int nShowCmd);
Return value: 0 for success, non zero for error.
hInstance - Current instance handle of the application
hPrevInstance - Previous instance handle of the application
lpCmdLine - command line argument string
nShowCmd - top window show attribute

DLL entry point DllMain()

DWORD  ul_reason_for_call,
LPVOID lpReserved);
Return value: 0 for success, non zero for error.
APIENTRY tells the compiler that it is an external/exported function.
hModule - This is the instance handle of the Loaded DLL.
ul_reason_for_call - reason for calling this DllMain() from Win32 subsystem
lpReserved - reserved variable.

Now from the above description it is clear that when we execute an EXE OS creates an instance handle and passes by hInstance argument. For next creation it passes current instance handle to hInstance and previous instance by hPrevInstance. Thus every time a new application instance is created, OS creates a new instance for it.

This is not true for dynamic link library. From the entry point it is clear that it only has one instance handle hModule and Win32 subsystem calls this function every time with a valid reason via ul_reason_for_call. Reasons are new process attachment, process detachment, new thread attachment and thread detachment.

DLL code is common thus there is no need to load it every time an application launches. OS maintains a single loaded instance through out the lifetime even if more than one process loads it. It reduces memory usage at runtime. When there is no application that uses a particular DLL or all the client applications are terminated then OS unloads the DLL from memory.

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