I think you actually understand it just fine but might be confusing yourself a bit. Paying the reservation fee does just get you reduced per minute rates, but

I think you actually understand it just fine but might be confusing yourself a bit. Paying the reservation fee does just get you reduced per minute rates, but the fee is not $200/mo. The reservation fee in this example is $676 for an entire year. Once you pay that, your hourly rate for a single m1.large goes down to $0.056. My final $100/mo total is based on 24/7 uptime on that single server you've reserved.