Betting the Farm
Dare has a very interesting post on S3 and EC2. I've been very interested in both those services for a couple months now and the other night I made time to read up on these services. S3 is quite interesting, to my mind it's memcached on a really grand scale, but Dare's absolutely right that EC2 is truly underappreciated. The high level descriptions make it sound like black magic, but it's really quite straightforward if you're used to using something like VMWare or VirtualPC. In fact, it seems to amount to server virtualization with a SOAP control interface.
Dare makes one point: "I'm not sure I'd want to place myself completely at the mercy of Amazon especially since there doesn't seem to be any SLA published on the site." I'm not so sure this is a deal breaker. As Greg pointed out recently, the money you get from an SLA violation is small consolation. In the end, outages happen, and the SLA really doesn't matter. You'll end up putting yourself at the mercy of someone - hardware, hosting company, co-lo... anything and everything can fail.
I know if I were building a startup, I'd seriously consider the Amazon services. S3 does have the issue of latency - it's extremely slow storage, and EC2 seems to be built around the assumption that you'll do all of your I/O using S3, which is a big architectural assumption, and a big investment in code that runs only on Amazon's boxes. Still, the price and functionality make those services pretty compelling.