You meant the camera APP, right?
Well, it doesn't have "cool" filters by default, just crop and red-eye.
Basically think of Instagram as Twitter but JUST for pictures.
So you take a picture, apply a filter, pick a title, put one or more hash tags and then your picture is uploaded and your followers get it on their stream and people monitoring the hash tag(s) you put will see it, and people can like the picture and/or comment on it.
And yes you can have followers and follow other people.
It's social networking that's it.
But it became so popular that Facebook wanted a piece of the pie and bought it, although they have stated they have no intentions to merge it or anything.