[rehack]

Can agree with that. 1 month vs 3 years.

In fact we ourselves, have not been able to go for a reserved instance yet. Although have been thinking about it for an year or so. As there is always a likeliness of going to a bigger configuration in the near future (small->medium or medium->large etc.). So you are not sure if reserving is a good idea.

So you settle for the gains of the on-demand e.g. having more instances in the day

[sorenbs]

Reserved instances are not tied to a specific machine. If you buy say 5 reserved instances of a specific server type, you have a pool of servers that can run at a discount. IE if you decide your DB needs to go on a bigger box you can apply the reserved instance discount to some of your application servers or whatever.

[taligent]

They are tied to the availability zone though.

Not a big deal if you are from the US but if you are from Australia for example then you wouldn't be able to take advantage of a Sydney availability zone if it become available (as it is rumored).

[rehack]

Yes, they are tied to a availability zone. Another thing I found confusing them is the choice of platform e.g. there is Linux and Linux VPC, after some searching I figured I should just choose Linux.