Machine instructions are the lowest-level instructions in the system, and are directly executable at the hardware level. A Machine Instruction is a bit pattern corresponding to a specific command for the processor. DSP's, FPGA's, Network Processors all operate with machine instructions. A typical machine instruction could be: "Copy the contents of Memory Location #2342FE into the Accumulator register".
The appplication software and the system software are translated into machine instructions by the compiler, which is "hardware-aware" (it knows what machine instructions to use, what the layout of the memory is, etc.). Every processor model has its own machine code, or instruction set.