Re: I need clarification..
1. yes, you have two databases running then. The Oracle software is installed only once.
But you have to instances each with its own associated database (i.e. data files, control files etc.)
2. No, each instance has its own set of datafiles control files etc.
This would only be possible in a Parallel Server setup. Don't think you are using this.
3. You have to set your environment variable ORACLE_SID before you log in. E.g. set ORACLE_SID=DB1, then you can log into DB1: sqlplus....
hth,
Helmut