Average velocity on a position-time graph is determined by the slope of the line connecting two points, calculated as the change in position divided by the change in time. Instantaneous velocity is found by determining the slope of the tangent line at a specific point on the graph. This process involves identifying two points close to the desired point to approximate the slope. A practical method for finding the tangent line involves using a mirror to visually align with the curve at the point of interest. Understanding these concepts is essential for analyzing motion in physics.