"Now, my impression would be that this means you can't sue Amazon (or their partners/customers/etc) over IP violations BY THE AWS PRODUCT ITSELF. In other word, if you use AWS you can't then later sue Amazon or their customers saying that AWS itself violates your patent on using a computer remotely (or whatever ridiculous patent you may hold). With this interpretation it is an extremely reasonable provision and should not concern any company involved in normal business."
The amount of bad armchair lawyering here is saddening :)
Why do people need to go on impressions?
The agreement "govern(s) your access to and use of the Service Offerings (as defined below)". Hey, looks like they define Service Offerings, below.
So rather than guess or have an impression as to what it means, why don't we look at the definition of service offerings, a defined term in the contract.
“Service Offerings” means the Services (including associated APIs),
the AWS Content, the AWS Marks, the AWS Site, and any other product
or service provided by us under this Agreement.
Service Offerings do not include Third Party Content.
“Service” means each of the web services made available by us
or our affiliates, including those web services described in the Service Terms.
So there you go, no need to guess or have an impression of what it covers.
That is what it covers when it means service offerings.
As for it's okayness -- i'm actually generally in favor of these kinds of clauses. However, this one is a bit too broad.
I hope you aren't an open source project who uses AWS, and who AWS uses to provide services in some fashion. Because if you are, congrats, Amazon can do what they want with your software and you can't stop them (ie violate the GPL, whatever).