Please be aware that this this feature natively does not work for consoles; as a result its overall usability is considered questionable.
Usually each separate mesh of a model results in an additional draw call for the engine. In order to reduce the number of drawcalls, the engine can make use of a hardware feature that is called 'geometry instancing'. By using this feature, the engine can combine identical meshes of a model and draw them in a single drawcall. Instancing is mainly useful for complex objects consisting of a lot of separate elements that have the same geometry but a different transformation.
The engine can automatically determine when elements of an object can be instanced. However, there are a few rules that need to be followed or instancing will not be possible:
Fence consisting of instanced elements (instances are blue).
No special setup is required in Sandbox, just place your object as a brush or simple entity.
r_GeomInstancing
Toggles HW geometry instancing.
Usage: r_GeomInstancing [0/1]
Default is 1 (on). Set to 0 to disable geom. instancing.