Figure 2 is a simplified diagram showing how Eucalyptus pulls everything in your cloud together. There is only one cloud controller per cloud. Walrus is the interface to Amazon EC2, so you don't need that if you're keeping everything in-house. A node is a physical server running a KVM hypervisor. A hypervisor runs multiple operating systems, each in its own virtual machine. Each VM is an instance. Each Node Controller controls a physical server. A Cluster Controller controls one or more nodes. SOAP and REST are developer tools for creating Web applications and interfaces.
Canonical is replacing Eucalyptus with OpenStack in the 11.10 Oneiric Ocelot release. Should you jump to OpenStack? Not just yet. OpenStack and Eucalyptus have significant differences. Eucalyptus supports APIs to Amazon's EC2 platform, and these APIs are well on their way to becoming the de-facto standard. OpenStack is completely open source and always will be, while Eucalyptus includes proprietary closed-source components in its enterprise edition such as VMWare support and better SAN integration. OpenStack does not support VMWare or AWS, though these are on its development roadmap. OpenStack was created by Rackspace and NASA, and has drawn worldwide support including tier 1 vendors such as Dell, AMD, Intel, Cisco, and HP.
A big issue in cloud computing is the unresolved question of APIs. The APIs for AWS have almost become a de-facto standard. APIs are very important, because they control your mobility -- a standard cloud API means you can easily move between vendors and products, and can standardize on the same API for both in-house and outsourced cloud services. Competing APIs mean coding and migration pain. Mark Shuttleworth, the head of Canonical, is advocating for standardizing on AWS APIs. Red Hat and VMWare, two big players in cloud computing, are each pushing their own APIs. My crystal ball is cloudy; all I can suggest is be ready for anything.
Eucalyptus is tested and functional right now, while OpenStack is still a developer's preview. You can grab the latest Oneiric Ocelot release to start getting acquainted. Oneiric Ocelot's final release is October 2011. This will not be a long-term release with a five-year support cycle, but an intermediate release supported until April 2013. Me, I would run this in a test lab and keep Lucid Lynx on production machines until I have a good reason to migrate. No worry, no hurry, and figure it all out at your own speed.