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It may be a misinterpretation of the TOS. It is a little unclear what Instagram is actually saying. The Wall Street Journal had a piece about that yesterday:
I read beyond that section of the TOS and there are still clauses that say you own your images. I think this may be a case of a cautious legal department writing a TOS to cover some of the things that are inherent in online social media advertising, but doing it in a way that blows people's minds when read out of context. I'd wager we will see a revision within the week.
If you are really concerned about it, you can download your photos and close your account. That is the only way I know to "opt-out" and it's what Instagram deserves for making this change.