"She is wearing a scarf instead of a hat."
Translation:Hun har på seg et skjerf i stedet for en hatt.
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sted (stead in English) means place so we are really saying 'in the place of'. I'm sure you know that -et means 'the', but you also have to take every learning opportunity, as you now know that sted is neuter (since it would be *steden otherwise).
I would guess that there is no article in the English instead of because articles weren't too important early Old English, only becoming popular later. And just to show how random languages can be, Wiktionary tells me that the word is masculine in Old English.