The filters are part of it, because of the way they gloss over crap/boring photos with a layer of nostalgia.

But there are plenty of camera apps on the iphone that have filters (often exactly the same ones) and can post to facebook/flickr/picasa -- and they haven't generated the interest Instagram has.

There's more to it, and it really does seem to be the social-network-seeing-what-your-friends-doing part.