"This is the biggest change since the day we launched," CEO and co-founder Kevin Systrom tells Mashable.
"It represents a complete overhaul of the heart of Instagram," Systrom adds. "It's a change in innovation around the camera, and the next generation of what we're going after: a super-fast, super-usable app."
The most noticeable change in version 2.0 is the Instagram camera. Now, every photo-related action -- applying a filter, adding the tilt-shift effect, rotating the photo -- has been compressed into a single view, which you can see as you shoot.
By clicking on the new top bar, Instagram users can toggle photo borders on and off, adjust flash settings, rotate the camera and apply tilt-shift with pinch-to-zoom gestures. On the bottom bar, users can grab a photo from the camera roll or tap the eye icon to preview filters in real time through the lens, before snapping the shot.
Applying these features to a live shot was, says Systrom, the most arduous task for the startup. "The hardest thing is taking the filters that we had done in the past and converting them into live filters," he says. "Our filters are complex."
While it previously took the application six seconds to apply a filter, Systrom says it now only takes six milliseconds.
Instagram-obsessed photo-takers will also notice the addition of four new filters: Amaro, Rise, Hudson and Valencia. The filters were created by popular Instagram iPhoneographer Cole Rise and represent his old-film-with-a-fresh-twist aesthetic.
Filters, as Systrom sees it, remain the application's biggest draw. "We want to get really serious about creating filters that are gorgeous and make people excited to take photos with Instagram."
But of all the features introduced in version 2.0, Systrom is most excited by the addition of high-resolution photos. The startup now saves 1936x1936 resolution captures to the photo roll on the iPhone 4 (and 1536x1536 on the iPhone 3GS). Systrom sees the upgrade as adding permanency to shots, and making them appropriate for print publication.
Altogether, the updates in version 2.0 represent Instagram's lens to the future. "This is important to bringing Instagram to masses," Systrom says. "This will take us from 10 million to 100 million users … and changes the game in the terms of usability and efficiency."