Earlier quoted context omitted.
AWS makes a lot of sense in a 24/7 environment, particularly when you are a new startup and don't have enough information (or capital!) to make educated server purchases.
They don't have to make any purchasing decisions. They can rent servers from companies like Softlayer and Rackspace (#3 and #4 behind AWS for YC startups), or spin up much cheaper VPS's (Linode's #2). We're talking $120/month commitments, not buying hardware and driving to a data center to install it. Deploying to a freshly imaged physical server is the same as deploying to EC2, and they can be provisioned for you in…
Unless they have dramatically improved their offering in the last couple years, an hour or two from "I need a new server" to delivery is 1) not an accurate timeframe for physical servers from Rackspace and 2) even if it was realistic, that's an eternity when you are trying to iterate quickly. I can have a new server in 30 seconds with AWS and in the course of an hour could have tested my automation tools half a dozen times or more vs reimaging a server over and over again.
I'm not saying it's always the right choice or that it's cheaper, but that flexibility combined with some of the pre-canned tools (ELB, RDS, CloudWatch, SQS, SNS) has tremendous value even when you aren't autoscaling.