The main benefit that I've seen from cloud computing is scalability, not price or performance. If you are running a website with predictable load, get a box that will handle that load plus some cushion. But if you have an app that has unpredictable load, the cloud will let you run 50 boxes one hour, and 2 the next. The savings come from not running 50 boxes when you only need 2.
The advantage you get from AWS is not related to the "cloud" (eg. virtual machines hosted elsewhere). The advantage is from the virtualization. If you have unpredictable load (like many people do) then you would actually benefit far more from having physical hardware utilizing virtualization.
If you think "scalability" is simply "spin up more AWS instances", you're wrong. In the time it takes for you to "cloud burst" from 2 instances to 50 instances (which, mind you, in most cases happens in an extremely short period of time... think measured in seconds), you're site will be screwed. Even if you have the best automation setup ever known, it still takes on the order of several minutes to get an instance of a machine up and running on AWS.
"So, the next time a vendor is like, 'It's going to be so cool, you can cloud burst your way to safety.' just tell him you are not a magical unicorn." - Adam Jacob (on Cloud Bursting and Other Magical Unicorns http://youtu.be/NTijokrOw6o )