This Y-Combinator article <http://news.ycombinator.com/item?id=1460725> says it best. I have used EC2 since 2009 and the on-demand price of an m1.small has started at $0.10/hour. Since the performance of the instance has seen little change, you would expect after one and a half years have elapsed the price to have fallen to 0.05/hour, and after 3 years $0.025/hour. Instead the current price is $0.065 per hour.
When I initially subscribed to EC2 it was a great deal. Now the pricing is becoming excessive. With the advent of OpenStack, I see Amazon being forced to lower their prices.