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Now I’m no insider, but what I read of this is:
Now we are part of Facebook, we are going to try to do those crap Facebook ads. You know the ones you all moaned about months ago, in which an advertiser who you liked can use your picture to tell your friends that you like their product.
So to allow the local coffee shop which you tagged the photo of your latte, to try to get your friends to also take photos of their lattes, Instagram need to change a couple of the terms.
Now in theory this also allows them to sell my photos for a huge billboard ad at every train station, but then the highest res photo stored on Instagram is 600×600 pixels. Not the greatest for print media.
The biggest PR problem for Instagram is the failure to explain.
People will leave, but like those who wandered off to app.net, without your friends all following, what’s the point of being part of something if it’s only you?