What's Facebook Doing with Instagram?

So long as you don't live under the rock, you've probably heard that the Facebook bought Instagram for 1 billion dollars. That's some serious money for one app, 13 or so employees. Hipsters will move on from "yellowish" filters, and people will find better things to do than taking photos all day, and I think Facebook realize that, Zukerberg must have seen something beneficial. So why do you think Facebook still bought it? Is it because of the huge user base? If it is, then what is facebook going to do with this user base? If not, what do you think the reason(s) is (are)?

I want to hear you guys' thoughts.