Yes, spot instances are significantly cheaper than even reserved instances. For example, a 3-year heavy utilization cc2.8xlarge instance costs $0.49/hr (with $10K up-front!), whereas its costs only $0.27/hr on the spot market (with nothing up-front). Your spot instance could run happily for several days or it could get killed 5 minutes later if there's a price spike. You have to accept uncertainty in exchange for the cheaper price.

Combining reserved instances with spot instances in the same pool can be a good strategy because you get cost-savings while also maintaining a minimum capacity. You can also spread spot instances over different availability zones, since spot price varies across zones.

FYI, I created an app that charts spot prices over time across various instance types, regions, and availability zones:

http://ec2price.com/