Amazon has announced that it is now capable of providing customers with the ability to launch a dedicated instance on single-tenant hardware meeting requirements of customers which have regulatory or restrictions that require physical isolation.
Amazon uses a highly customized version of the Xen hypervisor, which can run several instance which now support an associated tenancy attribute, which set to default will keep the existing behaviour; meaning that a single physical machine can run instances launched by serveral different EC2 customers. When the tenancy attribute is set to dedicated, all instances launched are single-tenant. Amazon doesn’t guarantee that the instances share the same hardware though because it spreads the machines out in order to minimize the effects of a hardware failure.
Concerning the pricing of these dedicated instances Amazon explains:
In order to keep things simple (and to keep you from wasting your time trying to figure out how many instances can run on a single piece of hardware), we add a $10/hour charge whenever you have at least one Dedicated Instance running in a Region. When figured as a per-instance cost, this charge will asymptotically approach $0 (per instance) for customers that run hundreds or thousands of instances in a Region.
We also add a modest premium to the On-Demand pricing for the instance to represent the added value of being able to run it in a dedicated fashion. You can use EC2 Reserved Instances to lower your overall costs in situations where at least part of your demand for EC2 instances is predictable.