Actually, scratch my recommendation for Slicehost, go with Mosso's CloudServers. They're both Rackspace companies (through recent acquisitions) and are the same product, but Mosso's is only $12/month (billed at $0.015 / hour) versus Slicehost which is $20 / month. Free support (limited time) with Mosso too. CloudServers also has integration with CloudFiles (their S3 equivalent).
While we already have free hosting available for semi-proprietary development platforms with services like Google's App Engine, Heroku, and to an extent Facebook, OpenSocial, etc... I wonder when these VPS hosts (EC2, Slicehost, Prgmr) eventually make their low-end services free?
Compare this to 10 years ago when web startups needed to secure $10 million of funding to buy servers before they could even launch a product. Now, start on a sub $100/month server, and scale it up (and out) as you need to. Amazing.