It's such an obvious app that it's surprising it took so long for someone to do it
The only surprise is that it took so long, there is now a tool to convert Vine videos into proper GIFs. While Vine captures some of the essential features of GIF animations and could become a replacement to GIFs in some cases, the ancient image format is still better and probably always will be in one respect, portability.A GIF will "run" everywhere, there are few browsers and devices out there that don't or can't support GIFs. Vine videos, on the other hand, use Flash on the web and are restricted to the app, on the other.
Twitter may very well overcome the problem, embeddable Vine videos will be a start, and replacing Flash with something like HTML5 video could make the videos easier to share, but it's going to take a while.
Meanwhile, the aptly named VineGifR will convert any Vine video into GIFs. Some quality (actually a lot of quality) is lost in the process, partly because of the inherent limitations of the GIF format but also because of the conversion.
There's no audio of course and the color space limitations are painfully obvious for some videos. But it does result in an image you can download and share anywhere you like.
The app is only for Mac, for the moment, but something like this shouldn't be that hard to put together for any platform. In fact, Vine would actually benefit from a feature like this built into the app.
Vine is just a couple of weeks old and, while it's popular, it's far too early to say whether it's been a success for Twitter. It has plenty of potential though, it may very well be the only video app that catches on, not for lack of trying.
But none of the other apps, all gunning for the "Instagram for video" title, figures out a way to get people to make and share videos as easily as Vine does.