Here's the short version: Instagram doesn't own your photos, but you gave them the right to use your photos however they want worldwide. They may use your photos for advertising purposes and you don't get a cut. Finally, they're not obligated to tell you jack if they do use the photos.
- Some or all of the Service may be supported by advertising revenue. To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you. If you are under the age of eighteen (18), or under any other applicable age of majority, you represent that at least one of your parents or legal guardians has also agreed to this provision (and the use of your name, likeness, username, and/or photos (along with any associated metadata)) on your behalf.
- You acknowledge that we may not always identify paid services, sponsored content, or commercial communications as such.
Gee, if only we had a chance to stop them from doing that.
***Update December 19, 2012***
In response to the public backlash of their new terms of service, Instagram has issued a release stating that their intention was not to sell photos. They promised to water down the language in the actual update but what they will replace the proposed terms of service remains to be seen.