Objects are a common concept in programming. The simplest definition of an object is a discrete entity with its own events and properties. Objects generally come from some class which defines the type of object. All objects of a particular class share similar behaviors and properties. In Scratch, there are two classes of objects: Stage and Sprite. Objects are instances of classes. All the object instances in a project are displayed in the bottom right panel.
There is always one instance of the Stage. You can create any number of instances of Sprites. To create a new Sprite object, click the center button of the three above this panel:
You will then be prompted to select a costume for a Sprite. Select any costume you like. Once the new Sprite is on the Stage, you can resize it by using the buttons in the top center of the window and then repeatedly clicking on the Sprite itself.
Now that there are three objects in the bottom right panel. Clicking on the Stage, Sprite1, or Sprite2 will allow you to modify the properties or write scripts for any of these objects. There are two key points to notice about objects. First, objects of a particular class have similar properties and actions. For example, click on the Motion tab:
Now click on Sprite1 and Sprite2 and compare the values of properties. You will see that X and Y change because the Sprites have different positions. Now click on Stage and then click on Motion again. You will see that all the actions and properties have disappeared because Motion is meaningless for the Stage itself.

Second, actions and properties on a particular object tend to affect only that object. This means that you can write different sets of scripts for each object that appears in the bottom right panel.