An AU (Audio Unit) Instrument is a AU Plugin that can convert MIDI events to audio. You can select an AU Instrument by clicking the instrument slot's down arrow. The AU Instrument plugins appear in the list's Plugins section.
AU Instruments look like AU Plugins. They have an additional Channel Selector. Some AU Instrument plugins respond to all MIDI channels the same way, in this case the channel setting doesn't matter unless you're recording using the Keyboard Mapper's split option or multiple keyboards. Other plugins, especially the ones providing many different sounds, do always require the correct channel to be specified.
AU Instruments respond to all the streams that are in the track's MIDI file. However, in most cases it will be easier to use multiple tracks (each using an instance of the AU Instrument) instead.
MIDI 2.0 / MPE
AU instruments receive per-note pitch bend, per-note brightness and poly aftertouch via MPE. Switching to MPE happens automatically when per-note pitch bend or per-note brightness are sent to the plugin. MPE won't be used if you've set the per-note pitchbend range to zero.
Plugins may have an MPE mode setting that needs to be set manually.
In macOS 12 AU plugins that support the MIDI 2.0 protocol will receive MIDI 2.0 instead of MPE.
Any MIDI output from the plugin is converted from MPE to MIDI 2.0. You can avoid this by setting the per-note pitchbend range to zero (in this case MPE to MIDI 2.0 conversion will only take place if the plugin sends MPE configuration messages (RPN 6)).