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I was using xcm and while filling parameters in destination, I encountered through a field Interior:xcmv2multilocationJunction and i selected x1 there . After that there is x1:xcmv2Junction which contains different options.

My query is how to use PalletInstance there. Could anyone guide me through this.

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The PalletInstance is just an u8 representing the index of a pallet within the relevant runtime. For example, in Polkadot Asset Hub, "PalletInstance":50 refers to the assets pallet. Hence the junction is pointing to a location which is within the asset pallet storage, i.e., a specific asset living in the asset pallet of the Polkadot Asset Hub.

Here you have more information of all the possible junction types and other relevant information about multi locations in XCM.

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