Now co-founder of the photograph app, Kevin Systrom, has released a letter saying that this is not the case. Instead they are working to create advertisements for businesses on Instagram. Apparently, this affects you by simply giving them access to your followers who also follow the business, your profile photo, and any other date you produce that can help promote the business.
From the start, Instagram was created to become a business. Advertising is one of many ways that Instagram can become a self-sustaining business, but not the only one. Our intention in updating the terms was to communicate that we’d like to experiment with innovative advertising that feels appropriate on Instagram. Instead it was interpreted by many that we were going to sell your photos to others without any compensation. This is not true and it is our mistake that this language is confusing. To be clear: it is not our intention to sell your photos. We are working on updated language in the terms to make sure this is clear.
To provide context, we envision a future where both users and brands alike may promote their photos & accounts to increase engagement and to build a more meaningful following. Let’s say a business wanted to promote their account to gain more followers and Instagram was able to feature them in some way. In order to help make a more relevant and useful promotion, it would be helpful to see which of the people you follow also follow this business. In this way, some of the data you produce — like the actions you take (eg, following the account) and your profile photo — might show up if you are following this business.
Systrom also claims that your photos will not be used for advertising, you still have full ownership of them and that nobody can access your photos if you have a private account. They seem to blame all of the confusion on misinterpretation of the original policies, but plan to iron everything out before the changes take place in 30 days.
Still seems fishy to me. You can read the entire letter here.