This is a big one. In a surprise development today, Facebook has announced that it will acquire Instagram for $1 billion.

An immensely popular photo-sharing service and social network for mobile phones, Instagram has been one of Silicon Valley's biggest success stories of the past two years. Last week the startup, which has just 13 employees, made headlines for a much anticipated expansion onto the Android platform, where it found over a million new users in just 12 hours.

The sale to Facebook is potentially a win for both parties, though it's not without potential pitfalls. At $1 billion, Instagram makes fully double what most investors believed it was worth just last week, when a post-Android funding round of $50 million gave it a $500 million valuation.

For its part, Facebook now owns what most had considered one of its biggest, if not the biggest, threats. Photos are key to the Facebook experience, and Instagram encroached on that territory with a service that was fun, addictive and 100 percent about great pictures. At two years old, the company has over 30 million users and is growing rapidly. But more key is how fiercely loyal its users are, engaging with the app with a degree of frequency that Instagram co-founder Kevin Systrom himself recently described as "Facebook-level."

The purchase is the biggest in Facebook's history and comes just weeks before the company is expected to go public. On his Facebook Timeline, Mark Zuckerberg said he was "committed to building and growing Instagram independently."

"Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people," he said.

Zuckerberg said Instagram users will be allowed to keep their Facebook accounts separate, and that Instagram would continue to work well with other social networks, such as Twitter.

"We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience," he said. "We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook."

We'll have more on this story as it develops.