Amazon EC2 allows businesses to run virtual machines in AWS data centers, providing scalable compute capacity. Developers can launch EC2 instances running various operating systems and application programs. Instances can be increased or decreased on demand or through reserved contracts. EC2 offers multiple instance types optimized for different workloads. Developers pay hourly for on-demand instances or get discounts with 1-3 year reserved contracts. EC2 provides easy scaling but developers must manage resources and security across many instances.