- Preventing websites from seeing your true IP? (you'll want to disable webrtc as well[1].) Mostly yes.
- preventing your ISP from spying on your traffic? (allowing Amazon to spy on your traffic in exchange...) Yes.
- Avoiding risk of legal threats if you engage in copyright infringement? Mostly no. They can subpoena Amazon instead of your ISP, and your lightsail/EC2 ip isn't shared.
Routing through a vpn, whether it's a commercial one or through AWS, linode, digitalocean, etc. will get you blocked on far more sites, because it's more difficult to identify individual clients, and there's more fraud and bot activity on any kind of vps or vpn netblock than there is on typical residential netblocks.
[1] https://github.com/gorhill/uBlock/wiki/Prevent-WebRTC-from-l...