Amazon EC2 Reserved Instances: "Heavy Utilization" clarification

Heavy refers to how much of a month the instance is turned on, not the CPU load, so yes, any 24/7 server would be "heavy utilization".

Another way to view the utilization rates above is in terms of aggregate usage. If you purchase a 3-year term Medium Reserved Instance, you need only run that instance for a total of 8.7 months over the course of the 3-year term (24% of the term) for your costs to equal those of On-Demand. Any usage beyond this amount incrementally increases your savings.

The difference is this.

If you purchase a Heavy Utilization instance you have already pre-paid in full the discounted hourly rate for this server even if you turn it off. By using Heavy Utilization your telling amazon that you will be using this 24/7 365 days a year.

The other levels, Light and Medium do not charge you the hourly rate while you're not using the server and your pre-paid discounted amount is lower based on that assumption. Lets take for example the following.

Heavy utilization

732hr/mo Light Utilization m1.small $97.50 (one time fee) + $438 hourly $535.50 / yr
732hr/mo Heavy Utilization m1.small $276.25 (one time fee) + $175.20 hourly $451.45 / yr

366hr/mo Light Utilization m1.small $97.50 (one time fee) + $219.60 hourly $317.10 / yr
366hr/mo Heavy Utilization m1.small $276.25 (one time fee) + $175.20 hourly $451.45 / yr

Notice that no matter how many hours you use the heavy utilization you get charged the same per year. The other levels allow you to take advantage of the reserved instances without using the instance 24/7.