Instagram is not about the filters, its about the social network, I follow all my favorite artists there

I believe it's the same reason why people are sticking with facebook--their friends are there.

If your friends are on Instagram, aren't they also already on Twitter?

Nope, at least not in my case. I'd say that only 20-30% of the people I follow on Instagram (mostly Facebook friends) are on Twitter.

very few of my friends actively use twitter, it feels like there was a six month window there when many of them did, then instagram came onto the scene. It kind of felt like both services became mainstream (my friend base) at about the same time.

The user experience isn't as good with the default camera + filter, and upload process.

I agree. The new iOS7 has built in filters when using the default camera app. It was only a matter of time before others caught up with it. Not that Instragram offers any mind shattering feature.

There's also a useful side effect to Instagram.

It resizes and crops the picture, making it much smaller for uploads.

(Their resize filter is bad though)