I use both and Instapaper does much nicer job of reformatting HTML into something readable. Most of the time it is a blessing, but sometimes it may be the curse (e.g. you have colored table with critical information).
Because it is much more than that ... combines Read It Later, with Readability (Firefox add-on), and ability to download ePub to my N-900 (so it works virtually everywhere, not only on iP*). Also, there is no cost of using it ... if it goes away (or requires payment), I don't loose anything than one day worth of reading.