What are instances and classes really confuse

Umair,

    Classes create objects and instance variables store the state of the object.  

   Codeacademy has a great course on Ruby: 

    http://www.codecademy.com/en/tracks/ruby

Consider This

A Car is a class - all cars have some basic setups - an engine, a color, tires, breaks, transmission. However, some of those can have different options (manual versus automatic transmission).

When you instantiate an instance of a class you are creating a unique object that is a member of that class. Your car is an instance of the car class - it has a specific engine, color, tires, break types, transmission, etc...all those things could be considered the variables FOR the class and YOUR cars engine, color, tires, break types, transmission etc are the instance variables for your car.

Lynda.com has a great series in the fundamentals of programming with Simon Allardice and there is one devoted to Object Oriented Programming, both the principles AND designing. It's language neutral, which I feel is important because the principles are the same across most OOP languages, but the implementation is different.