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Each instance admin decides which servers to block for themselves. If you visit the info pages of some systems they will list blocked systems, and there are a lot of them.
There are some very unsavoury communities out there. Blocking usually revolves around how effective moderation is.
As an example you can see a list of servers blocked by mastodonapp.uk on the About page.
Oliphant maintains a minimum block list that most systems take as a starter list.