I'm a little late to the game here, but Amazon EC2 looks pretty cool. As with S3, the bandwidth pricing is a little steep but the rest is good - almost good enough for it to be an acceptable alternative to dedicated server hosting elsewhere, but not quite.
$0.10/hour = $2.40/day = $72/month for a dedicated (fairly fast) server, which is competitive with normal 'dedicated hosting' providers.
$0.20/Gb = $200/1000Gb, so you would be better off renting dedicated servers from a hosting company if you want to do much data transfer.
One thing I can see myself wanting to use it for is testing; particularly, it will be very handy to test PeopleAggregator once we do the work necessary to scale across multiple web and database (not to mention cache and file) servers. It's a lot of work to set up enough machines to properly test something like that, but EC2 would let us quickly set up a bunch of test clients, databases, web servers, and whatever other miscellaneous machines we need, then easily tear them all down afterwards.
I expect it would be feasible to use one of Amazon's public images for this. A script could handle the installation (perhaps bootstrapping - sending all the files to the first EC2 instance to come up, then installing on all the others from there) and run all the tests, then shut down all the instances. You could test for an hour on 10 machines (or 15 minutes on 40 machines) for a dollar!