Imgur solved a problem for Reddit the same way TwitPic solved a problem for Twitter.
I think it's a testament to Reddit that - unlike Twitter - they didn't feel like they needed to consume image hosting for their platform. It also spurred the growth of the meme sites. I'm sure Reddit will spawn more large niche sites yet.
For some heavily graphical subreddits (r/funny and such) the imgur subcategory is almost better, you skim faster through a gallery than through titles list.
I think it's a testament to Reddit that - unlike Twitter - they didn't feel like they needed to consume image hosting for their platform. It also spurred the growth of the meme sites. I'm sure Reddit will spawn more large niche sites yet.