This was the post made by the Instagram Official account right inside the App, we saw the post just 5mins after it was posted and took a screenshot of it as seen in this post.
We are yet to understand how the Instagram Ads tool will be used, or whether it will be open to all of us who use Instagram for us to also advertise, we definitely hope so.
Right now We are only certain that according to the caption of the post, ads will be shown based on your (Instagram users) Interest and you can hide the ad if it's not displaying the type you want to see.
We also noticed at the time the "announcement" was made by Instagram, the post was carrying the "sponsored" tag on the top right of the photo, it was a post yet we could not find the photo on their Timeline.
This is already giving us a glimpse of how the ads will run and we'll surely know more about it very soon.