Having deployed significant environments on both Linode and AWS I can safely say that the barrier to entry on AWS is nowhere near lower than Linode's, for all but the tiniest Wordpress blog.
The hourly, broken-up billing is a smokescreen; for exactly what you get out of a (now) Linode 1024, you'd pay $50+/month or so on AWS. Don't forget total bandwidth, an elastic IP, and so on.
The ongoing TCO of AWS is much higher than Linode, of course. But that's precisely my point: you want to capture customers at birth, incubate them into adulthood, and then charge them a lot of money now that they can afford it.
A friend of mine is running an ASP.NET MVC/Mono/MongoDB ecommerce site on micro with around a quarter million of annual sales. The site is very very fast.
I don't find my cheap t1.micro based IRC bouncer / VPN / reverse SSH endpoint / static-content generation box to be an awful joke at all. They're quite useful for many things.
You also want to avoid scammers and fly by night operations that don't value your business other than to find cheap CPU and bandwidth. There is a set level of overhead for each new customer, and new customers are probably more likely to need additional support. The lower you go with pricing, the larger this portion of your costs eats into your profits.
There are $10 VPS solutions out there, but their poor reputations lends credence to the idea that $10 VPS solutions are not where the money is at.
There is Hetzner.de which I like quite a bit as a company. I have been hosting with them for 3 years. They have a 512box for 6.5 EUR if you are exempt from taxes like a Non-EU citizen .
Its not a smokescreen if you are using AWS for a cloud (e.g., dynamically provisioned according to need) server infrastructure rather than as a simple VPS.
A lot of people are on AWS. If you are migrating from AWS, it doesn't matter any more what AWS' barrier to entry is, and it does matter what Linode's barrier to entry is.
The hourly, broken-up billing is a smokescreen; for exactly what you get out of a (now) Linode 1024, you'd pay $50+/month or so on AWS. Don't forget total bandwidth, an elastic IP, and so on.