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The project source and database instance provide connectivity to the metadata and data warehouse for a project. The project itself is the configuration object in which you define all the schema and application objects that comprise the reporting environment. The following illustration shows how project connectivity works:

A project source connects to a metadata, which can contain any number of projects. Each project uses a database instance that connects to the data warehouse. This database instance uses a database connection that points to the DSN and login for the data warehouse.
Every project has at least one primary database instance. You can map a project to multiple database instances using MicroStrategy MultiSource Option™.
Note:
    – A Project source should connect to only one metadata ( Its not advisable to connect to the same metadata from different machines –> Like say for example you have the IS Configured to point to SQL Server metadata database. Also you have 3 other IS machines configured to connect to the same metadata databases –> Which would lead to metadata inconsistencies )
    – You can have n – number of projects configured inside the project source
    – You can configure n – number of Project sources from different machines using clustered license which connects to same metadata –> Called as Clustering
Hope it helps for the day!!

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