Yes, if everybody would run their own instance, that would make it decentralized. But that is not going to happen. We need a protocol that allows ownership of your social graph without having to host your own server.
Mastodon/ActivityPub have chosen a federated model over a decentralized one. Federated has a lot of usability and scalability benefits over decentralized, but users sacrifice some privacy and ownership abilities. Everyone is free to choose their own tradeoffs.