Responding to user demand, Amazon has expanded its on-demand computing EC2 offerings. It is auctioning off unused EC2 capacity through Spot Instances which enable you to make a bid for computing time.

Bidders provide info on the instance family, size and region, number of Spot Instances they want and the maximum price they're willing to pay per instance.

You can view the EC2 API and AWS Management Console to see prior Spot Instance prices to give you an idea of how much to bid. The spot price is dynamic and varies depending on supply and demand fluctuations.

Just like in any regular auction, when the user bids above the spot price, then his/her computing will be taken care of at the current price.

They can then run those instances for as long their bid exceeds the current "Spot Price." But if the price increases above the bid, the instance will be stopped to be restarted once the price falls. A Spot Instance can also be user terminated when it's no longer needed. They won't be charged for partial hours of use.

There is a lot to think about when you are trying to determine if these bids are worth your while. Spot Instances could be an obvious way to go for tasks that do not have to adhere to a specific time schedule as you will have no control over when your applications would be interrupted or finished. Ancillary tasks that are not critical to your work flow can be accounted for and you can walk away with a pretty good deal.

Amazon suggests that ideal tasks for spots would be flexible ones not on a time crunch like incidental tasks, data processing, media conversion , Financial modeling and analysis, web crawling , you get the idea…The higher the bid, the more the chance that your request would be attended to. Also there are provisions in place for urgent capacity requirements.