How can a bunch of kids in a garage create a Web service that half the people on the planet can use at once? By running their app on the cloud computing platform from Amazon Web Services instead of on their own servers.
Amazon Web Services, a collection of services include a computing engine, a database, and storage services, were created to be easy to provision (set up), and to scale as needed. The real benefit is that the developer doesn't pay for services delivered until they are. So if a site runs along at a few thousand hits a day it won't cost more than a few pennies to run. But a big spike coming from a Digg or Oprah link will automatically cause AWS to bring more resources to bear. The developer will be billed accordingly.
Venture capitalists, who fund startups, used to look askance at a Web company that couldn't run its own servers. Now we're hearing that they're considering financially irresponsible if they do. The cloud is where the new Web apps live.