On-Demand Instances in cloud computing are a purchasing option that allows you to run a virtual server for as long as you need it without any long-term commitments. This is in contrast to Reserved Instances, which require a one- or three-year commitment.

• On-Demand Instances offer flexibility as you can increase or decrease your compute capacity depending on the demand of your application.
• They are ideal for short-term, irregular workloads that cannot be interrupted.

On-Demand Instances work by allowing you to lease compute capacity by the hour with no long-term commitments.

• You pay for compute capacity by the second with no long-term commitments.
• You can increase or decrease your compute capacity depending on the demands of your application and only pay the specified hourly rate for the instances you use.

A retail company, RetailCo, uses on-demand instances to handle their website traffic during peak shopping seasons. They can quickly spin up additional instances when traffic spikes, ensuring their website remains responsive. When the demand subsides, they can easily terminate these instances, allowing them to manage their costs effectively.