First the cost: As of February 2013, Amazon charged about $.02/hour ($15/month) for the smallest "Micro Instance" (t1.micro) virtual machine running Linux or Windows. High CPU and memory instances for Compute Clusters cost as much as $4.60/hour. "Reserved" instances can go as low as $6.43/month for a three-year prepaid plan. The data transfer charge ranges from free to $0.12 per gigabyte, depending on the direction and monthly volume (inbound data transfer is free on all AWS services. Storage: An EC2 instance may be launched with a choice of two types of storage for its boot disk or "root device." The first option is a local "instance-store" disk as a root device (originally the only choice). The second option is to use an EBS volume as a root device. Instance-store volumes are temporary storage, which survive rebooting an EC2 instance, but when the instance is stopped or terminated (e.g., by an API call, or due to a failure), this store is lost.
EBS volumes provide persistent storage independent of the lifetime of the EC2 instance, and act much like hard drives on a real server. More accurately, they appear as block devices to the operating system that are backed by Amazon's disk arrays. The OS is free to use the device however it wants. In the most common case, a file system is loaded and the volume acts as a hard drive. Another possible use is the creation of RAID arrays by combining two or more EBS volumes. RAID allows increases of speed and/or reliability of EBS. Users can set up and manage storage volumes of sizes from 1GB to 1TB. The volumes support snapshots, which can be taken from a GUI tool or the API. EBS volumes can be attached or detached from instances while they are running, and moved from one instance to another.
Simple Storage Service (S3) is a storage system in which data is accessible to EC2