Should I use Amazon's AWS Virtual Private Cloud (VPC)

NOTE: New accounts in AWS launch with a "default VPC" enabled immediately, and make "EC2-Classic" unavailable. As such, this question and answer makes less sense now than they did in August 2012. I'm leaving the answer as-is because it helps frame differences between "EC2-Classic" and the VPC product line. Please see Amazon's FAQ for more details.

Yes. If you're security conscious, a heavy CloudFormation user, or want complete control over autoscaling (as opposed to Beanstalk, which abstracts certain facets of it but still gives you complete access to the scaling parameters), use a VPC. This blog post does a great job summarizing both the pros and cons. Some highlights from the blog post (written by kiip.me):

What’s Wrong with EC2?

All nodes are internet addressable. This doesn’t make much sense for nodes which have no reason to exist on the global internet. For example: a database node should not have any public internet hostname/IP.

All nodes are on a shared network, and are addressable to each other. That means an EC2 node launched by a user “Bob” can access any of EC2 nodes launched by a user “Fred.” Note that by default, the security groups disallow this, but its quite easy to undo this protection, especially when using custom security groups.

No public vs private interface. Even if you wanted to disable all traffic on the public hostname, you can’t. At the network interface level each EC2 instance only has one network interface. Public hostnames and Elastic IPs are routed onto the “private” network.

What's Great About the VPC

First and foremost, VPC provides an incredible amount of security compared to EC2. Nodes launched within a VPC aren’t addressable via the global internet, by EC2, or by any other VPC. This doesn’t mean you can forget about security, but it provides a much saner starting point versus EC2. Additionally, it makes firewall rules much easier, since private nodes can simply say “allow any traffic from our private network.” Our time from launching a node to having a fully running web server has gone from 20 minutes down to around 5 minutes, solely due to the time saved in avoiding propagating firewall changes around.

DHCP option sets let you specify the domain name, DNS servers, NTP servers, etc. that new nodes will use when they’re launched within the VPC. This makes implementing custom DNS much easier. In EC2 you have to spin up a new node, modify DNS configuration, then restart networking services in order to gain the same effect. We run our own DNS server at Kiip for internal node resolution, and DHCP option sets make that painless (it just makes much more sense to type east-web-001 into your browser instead of 10.101.84.22).

And finally, VPC simply provides a much more realistic server environment. While VPC is a unique product to AWS and appears to “lock you in” to AWS, the model that VPC takes is more akin to if you decided to start running your own dedicated hardware. Having this knowledge beforehand and building up the real world experience surrounding it will be invaluable in case you need to move to your own hardware.

The post also lists some difficulties with the VPC, all of which more or less relate to routing: Getting an internet gateway or NAT instance out of the VPC, communicating between VPCs, setting up a VPN to your datacenter. These can be quite frustrating at times, and the learning curve isn't trivial. All the same, the security advantages alone are probably worth the move, and Amazon support (if you're willing to pay for it) is extremely helpful when it comes to VPC configuration.

Currently VPC has some useful advantages over EC2, such as:

• multiple NICs per instance
• multiple IP's per NIC
• 'deny'-rules in security-groups
• DHCP options
• predictable internal IP ranges
• moving NICs and internal IPs between instances
• VPN

Presumably Amazon will upgrade EC2 with some of those features as well, but currently they're VPC-only.

VPCs are useful if your app needs to access servers outside of EC2, e.g. if you have a common service that's hosted in your own physical data center and not accessible via the internet. If you're going to put all of your web and DB servers on EC2, there's no reason to use VPC.