I switched my hosting from a shared hosting provider to an Amazon EC2 Micro instance a while back. The biggest concern I had was making sure the limited resources of the micro instance were enough to run my site. As it turns out, it is more than enough. The thing the micro instance can't do is handle load that goes on for any extended time. My website doesn't receive too many hits so this is the perfect usage.
The above graph isn't from my website, but it is from a PHP web application running on EC2. The graph is from Google Webmaster Tools for a site Time spent downloading a page (in milliseconds) from the Google Crawler. You can definitely the switch in October from the shared host to the EC2 instance in the page response times. During this time period the average number of people accessing the server and the crawl time stayed about the same.
The bottom line, I highly recommend an EC2 Micro instance for any small website. While it does cost a little more than a shared host, the benefits definitely make it my top choice. The downside to a micro instance is once you have sustained high CPU usage for a certain amount of time your are severely throttled. As long as the usage is not sustained, your site will be very responsive.