I don't know much about this subject ... but here's what I've read about.
I think it might be used to handle peak loads. For example you run your server on your own hardware. When the system detects that your traffic is over a certain level then it fires up your EC2 server and your load balancing system splits the traffic between the two server. If the load gets even higher then more EC2 servers can be spun up to handle it. As the traffic decreases then the EC2 servers are shut down, one by one.
I don't know much about this subject ... but here's what I've read about.
I think it might be used to handle peak loads. For example you run your server on your own hardware. When the system detects that your traffic is over a certain level then it fires up your EC2 server and your load balancing system splits the traffic between the two server. If the load gets even higher then more EC2 servers can be spun up to handle it. As the traffic decreases then the EC2 servers are shut down, one by one.
http://aws.amazon.com/elasticloadbalancing/
So my impression is that EC2 is only going to be cost effective for sites with massive traffic.