is/instname_encoding is a SAP Parameter attribute which is used to control Define the encoding of the instance name information. This is available within R/3 SAP systems depending on the version and release level.
Below is the standard documentation available and a few details of the attributes values .
You can use this parameter to control how the SAP Web AS presents the
instance name externally (for example, in an HTTP session cookie).
Following values are possible:
none: Plain text: For example, ls100_BCO_10 (default) md5: MD5 hash of the instance name: e.g. FKOuCXKqMVOWyF5syzhQSQ If you use this parameter, make sure it is set the same on all SAP Web AS instances and on the message server (preferably in the default profile only) so that HTTP load balancing works with SAP Web Dispatcher, all application servers use the same instance name, and the message server also observes the parameter. This parameter does not need to be set in the SAP Web Dispatcher profile.
See SAP Parameter Documentation for full SAP documentation for this profile parameter.