EC2 instances are virtual servers provided by Amazon Web Services (AWS) that allow users to run applications in the cloud. They can be easily scaled up or down based on demand, making them flexible for various workloads. Users can choose different types of instances based on their specific needs, such as computing power, memory, and storage. Each EC2 instance operates in a secure environment and can be configured with different operating systems and software. This enables businesses to deploy applications quickly without the need for physical hardware, reducing costs and increasing efficiency in managing resources.