You can orchestrate automated failovers that provisions new servers even if you have dedicated servers to handle your base load. And the price difference with EC2 is so huge that you need really massive traffic spikes for it not to be cheaper to have a bunch of extra dedicated servers on standby.

Nothing stops your from spinning up data crunching EC2 instances at night either, if you want to, and if it really is more cost-effective for you than having VM on your dedicated hardware.

There's plenty of API's available if you want to run your own "private cloud" on those dedicated servers too. I never deploy outside VM's any more, even though I also mainly use dedicated servers.

EC2 is cost effective if you truly have really short term (< 4-6 hours per day) batch processing needs. It continues to shock me how many people take the pain and cost of dealing with EC2 for more typical web app usage.