EMR is a collection of EC2 instances with Hadoop (and optionally Hive and/or Pig) installed and configured on them. If you are using your cluster for running Hadoop/Hive/Pig jobs, EMR is the way to go. An EMR instance costs a little bit extra as compared to an EC2 instance. A quick check on Amazon prices today reveals that a small EC2 instances costs $0.08/hour while a small EMR instance costs $0.015/hour extra.
In my opinion, it's totally worth paying that extra money to save yourself the hassle of installing and setting up Hadoop (along with Hive and Pig), creating and maintaining and AMI and using it. Moreover, EMR's version of Hadoop and Hive has some patches that are not available (atleast, not yet) on Apache Hive. If you use EC2, you will probably be using Apache Hadoop and Hive (or may be, the cloudera distributions) and wouldn't have access to those patches (like native support for S3 or commands like ALTER TABLE my_table RECOVER PARTITIONS
References:
- http://aws.amazon.com/ec2/pricing/
- http://aws.amazon.com/elasticmapreduce/pricing/
