3. Do you have to pay for a virtual PC instance and the resources it consumes whether it is running or not? Do you have to pay for the OS licensing on top of the resource charges too?
Yes, all cloud computing providers charge by the drink, by the glass, and by the bar stool if you want to continue the analogy. What this means is that just about anything and everything has an associated cost to it – the number of CPUs per server, the amount of RAM and disk storage, external IP addresses, software and OS licenses, network bandwidth, and so forth.
Amazon only charges for running instances of its servers: when you power them down, you save some cash. Cloudshare doesn't charge for its OS licenses, which is how they can get away with offering three free virtual servers for their free basic accounts. (You do have to access your environment at least once a month to keep the account active, however.)