What is the best way to learn how to write fiction? Is it better to read instructions, or to read good examples and try out what you've learned with your own work? Why?

Combine them all. Look at all the things that have been formulated as rules, then look at the examples used to illustrate the rules. Look at your own writing and that of writers whose work you admire and try to see how that follows or diverges from the rules. There’s a lot to take in, and it takes a lot of time to gain the experience needed to apply the right rules at the right time throughout your writing, and you’ll likely need to keep going back to look at the rules and examples again and again in between rounds of reading and writing. I’ve noticed writers who have learned to do the job well with their first book and who then slide, failing to do so well with later works, so the job is never complete and you need to keep revising your skills.