Hi,
Dimension : for e.g you mentioned time and category then you can create an instance of this tepmlate by chnaging the IDs of these two dimension. Say for category Actual and Period 2013.01 you create an instance, next manth for category Actual and Peiod 2013.02 you create another instance of the template and so on.
Driver Dimension:for e.g, you mentioned entity. Then every time you create an instance it will be automatically get generate for each entity in the entity dimension.
Please try implementing it in the system, u will youself be able to understand.
Regards,
Kalyan.