S3 is one of the greatest things ever: turn capex into an operating expense. My dream is a world of only variable expenses and the cost of starting a company drops to almost $0...

What happens when all your data is on S3 and Amazon decides to raise their prices ?

This is exactly what StreamFocus is worried about. But, if the Amazon business model is successful, it will be hard to stop the me-too companies from coming in to the market. So this means there will probably be competition which means there will be other vendors available with similar services. Switching from one to another company in terms of coding will most likely be a very simple thing,

I noticed that the amazon stock price seems to have taken a jump of ~25% four days ago, what was that all about - was it related to the buzz around S3 and ECx?

An interesting article from smugmug but they wrote it back in November 2006.