Lemmy cant provide TLS on its own, and TLS is required for federation.
If you’re hosting more applications/websites on the same machine, you’ll need a reverse proxy that will be able to redirect your request to the correct location.
I just have a $5/month ubuntu server at the moment. It’s not running anything else. In this case I wouldn’t need that and could just set up a regular web server?
Lemmy has it’s own build in webserver and you need to proxy to it using another webserver, such as nginx. You could also use Apache with mod_proxy or any other webserver that does proxying.
Fyi, you can still run other websites, even if you proxy Lemmy. It’s just another virtual host, but instead of pointing to a directory, you point to another webserver (Lemmy’s).
EDIT: and yes, you should definitely proxy. Lemmy doesn’t do SSL. Any reason why you wouldn’t want to run a web proxy?
nginx or HAProxy are probably the best options, but you can also just set up a simple stunnel.