You need to compare costs on the comparable commitment time-frame. You are assuming a 3 year commitment with Amazon. Classic hosting has a monthly commitment.
I think most dedicated hosting often demands a setup fee of 50$+ or a 1 year commitment.
And even not taking in account the setup fee and the commitment, at 27$/month, you get a lot of power for your buck comparing to the cheapest dedicated server available at maybe something like 60$/month.
Cheapest dedicated box I could quickly find is at 59$/m, and even with a 2 years commitment you get "only" a 25% reduction which put you price at ~45$/m:
The article itself contains a much better example. Setup fee of $65 and then $51/mo for 8GB RAM, 750 GB HD and i7.
http://www.hetzner.de/en/hosting/produkte_rootserver/eq4
Yes, but that dedicated box (even an older/cheaper one) is going to beat the pants of S3's I/O. Apples and oranges.
The actual cost for a planned _Reserved Instance_ on EC2 is much lower and is a much more realistic scenario for hosting : it cost about 27$/month for a 3 years reserved small instance (425$/36 months + 14.64$), not 60$/month.
No one knowing it will use an instance 100% time should opt for On-Demand instance, because yeah, it costs a lot.
https://aws.amazon.com/ec2/#pricing http://calculator.s3.amazonaws.com/calc5.html