Looks to me like they're replacing GIFs. Short clips, muted by default. If they succeed this will be a welcome change for the internet because video compression has advanced significantly since the days of GIFs.
It's more of a tweet-like approach to posting videos. The way I see most of my friends using the service is as a companion to Instagram, when they want to express a moment in a series of small video clips instead of in a single photo. I suppose you could call that "replacing GIFs" but it's more like YouTube than it is like Geocities.
* Timing: More people have camera phones / 3G/4G/LTE
* Aping the existing Instagram structure for the news feed
* Probably initially used AWS backend for cheap storage
* Native App focus first and foremost
* Immediate acquisition by Twitter
