It’s basically a custom Linux distro maintained by Amazon that’s based on CentOS 5. One of the biggest problems with EC2 until recently is that the official AMIs provided by Amazon are ridiculously out of date. For example, the standard Fedora AMI is Fedora 8—the latest version of Fedora is Fedora 13.

However, the fact that it's based on Centos 5 doesn't seem great too me. Granted, I've only started using Centos recently, but it seems like most packages are not kept up to date in the default repositories, and you end up having to add a few independently maintained ones to get some more recent software.

But yeah, can always just install from source I suppose. Perhaps I'm "Doing It Wrong" on Centos.

Centos 5.x exactly tracks bug-for-bug what RHEL 5.x is. That is why some of it appears old.

If you don't need or want a free version of Linux that is exactly compatible with RHEL, then simply add some repositories, such as EPEL or the DAG repository (http://dag.wieers.com/rpm/ ) .

It doesn't allow anything that wasn't possible before. It's just a virtual machine image. Kinda like how anyone could roll their own Windows virtual machine images in Virtual PC by booting up and installing Windows, but Microsoft provides pre-built images with Windows so you don't have to.