One installation and two sets of databases/files. Has some advantages:
1: If you use a php accelerator only needs to store in cache every file once.
2: Apart from the manual changes in the config.php the upgrade is done only once
3: better than all together, if the server has performance problems databases can be split into different computers, and if required also two servers can be used. Database tables are kept smaller so searching is faster
Installing and upgrading help
Installing two copies of Moodle on the same server.
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