At the time I believe it was called "utility computing". I think they were a few years ahead of the curve, and far too dependent on their own hardware platform, for it to be a viable product.

Amazon hit at the right time: virtualization as a concept was being adopted by developers, storage needs were going through the roof, classic storage systems weren't scaling at reasonable costs.

Amazon's other strength is that they can use the massive revenue they have sitting around for short periods of time to build out their computational infrastructure (turning their operational revenue into capital spending). IaaS took off; SaaS somewhat, and PaaS almost not at all (except in a few well defined areas).

I can't really see what oracle woudl bring to the game. It looks to me like they are just making a play to take their existing customers and move them to their data centers.