What happens to data stored on the instance when Auto Healing kicks in?

When an instance is auto-healed, it is shut down first and then a new instance with the same name and configuration will be started. This is similar to the process of stopping an instance and starting it later.

As the original AWS instance is terminated, all data not stored on EBS volumes will be lost. The newly started AWS instance to replaces the healed one will re-attach all EBS volumes associated with that instance.

If your instances gather data you want to keep, always store it on EBS volumes.