AMIs(Amazon Machine Images) are like templates of virtual machines and an instance is derived from an AMI. AWS offers pre-baked AMIs which you can choose while you are launching an instance, some AMIs are not free, therefore can be bought from the AWS Marketplace. You can also choose to create your own custom AMI which would help you save space on AWS. For example if you don’t need a set of software on your installation, you can customize your AMI to do that. This makes it cost efficient, since you are removing the unwanted things.