Instantaneous velocity is defined mathematically as the limit of the average velocity as the time interval approaches zero, which can be confusing since it suggests a car is motionless at any single instant. The discussion emphasizes that while a car may appear stationary at a specific moment, its instantaneous velocity reflects the rate of change of its position over an infinitesimally small interval. This concept extends to derivatives in calculus, where the derivative at a point represents the limit of the average rate of change as the interval shrinks. The conversation highlights that understanding instantaneous velocity relies on recognizing it as a formalization of intuitive ideas about motion and change. Ultimately, there is no inherent contradiction in defining instantaneous velocity; it is simply a matter of mathematical definition.