Amazon Web Services: Amazon Elastic Compute Cloud (EC2) now in limited public beta. The joys of pay-as-you-go storage (as with Amazon S3), now with computation. And bandwidth between your EC2 application and S3 storage is free!

One tricky bit is that disk images do not save state, so in the event of an instance outage (or explicit shut-off by you), anything not saved to S3 or off-site storage is lost. Traditional applications that depend on random-access disk storage will run within an instance, but will need some kind of explicit (you write it) backup and restore mechanism if you want their state to persist reliably. Beta testers are eagerly trying to determine best practices for, say, running a MySQL cluster inside EC2. It's possible, but provisions need to be made for EC2's scalable design.

Also, IP addresses are assigned to instances dynamically when they start up, so the process of instances knowing about each other, and of external apps communicating with instances, also needs to be managed somehow. Another good use of S3.