That is using ECS + Fargate. This gives you (IMHO) the best of both worlds between Lambda and EC2.
ECS is Elastic Container Service. Think docker/podman containers. You can even pull from Dockerhub or ECR (Elastic Container Registry - amazon's version of dockerhub). ECS can then deploy to either a traditional EC2 compute instance (giving you a standard containerization deployment) or to "Fargate".
Fargate is a serverless container compute instance. It is like serverless EC2. You get the "serverless" benefits of Lambda, but it is always-on. It has automatic scaling, so it can scale up and down with traffic (all of which is configured in ECS). You don't need to manage security updates of the underlying compute instance or manage the system. You get high-availability and fault tolerance "for free". But at the end of the day, its basically a non-managed EC2 instance. You can choose the ram/cpu options that you need for your Fargate just like any other compute instance. My recommendation is go as small as possible and rely on horizontal scaling instead of vertical. This keeps costs as low as possible.
When I hear people trying to keep Lambdas running indefinitely, it really defeats the purpose of Lambda. Lambda has plenty of benefits, but it is best used for functions that run intermittently and are isolated. If you want the serverless benefits of Lambda, but want to have the benefits of a traditional server too, then you need to look at Fargate.
And of course there is a world where you combine the two. Maybe you have an authentication service that needs to run 24/7. Run it via ECS+Fargate. Maybe your primary API should also run on Fargate. But then when you need to boot up a bunch of batch processing at midnight each night to send out invoices, those can use Lambdas. They do their job and then go to sleep until the next day.
I should also add that the developer experience is far superior going the ECS+Fargate route over Lambda. I have built extensive APIs in Lambda and they are so difficult to debug and you always feel like you are coding with one hand tied behind your back. But with ECS+Fargate you just build projects as you normally would, with your traditional environment. You can do live testing locally just like any other container project. Run docker or podman on your system using an Amazon Linux, Alpine Linux, CentOS base. And that same environment will match your Fargate deployment. It makes the developer experience much better.