In an increasingly competitive market and wearing a target on its back, Amazon Web Services LLC, the company’s cloud arm, went into the hybrid cloud business Wednesday when it announced Amazon Virtual Private Cloud (VPC).

Still in limited beta and only in Amazon’s Eastern US Availability Zone, VPC is described as a secure and seamless bridge between a user’s existing IT infrastructure and the AWS cloud and suggests it can be used for disaster recovery as well as test & dev not to mention applications like, say, oh, e-mail and CRM without anybody being the wiser.

AWS senior VP Andy Jassy says VPC was built it to seamlessly connect a company’s existing resources to the AWS cloud “as if it were a part of their own datacenter.”

Amazon VPC lets enterprises connect their existing infrastructure to a set of isolated EC2 compute resources – which can be accessed as though they were local – via an industry-standard encrypted IPsec Virtual Private Network (VPN) connection and extend their existing management capabilities such as security services, firewalls and intrusion detection systems to include their AWS resources.

It’s talking Linux, Unix and Windows instances.

At the moment Amazon VPC only integrates with EC2; other AWS services will follow.

Amazon CloudWatch can be used for monitoring instances now but Elastic IP addresses, Auto-Scaling and Elastic Load Balancing aren’t functional. On the other hand, traffic from Amazon S3, SQS and SimpleDB will route the VPN connection, which Amazon means to make connect directly with the Internet at some point.

It says customers didn’t want that exposure just yet

Like other AWS services the widgetry is pay-as-you-go with no long-term contracts, minimum spend or upfront buy-in though it anticipates that the VPN connection will be running all the time and there will be an hourly charge of a nickel an hour for each VPN connection and the data transferred plus the standard charge for each EC2 instance.

Patni Americas VP of solutions Vikram Watave suggests that VPN will push Amazon to offering dedicated hardware and more demanding SLAs in exchange premium pricing. He also thinks that VPN may involve a limited number of configurations.

Patni does development and Q&A testing for VMware and Watave says mere logical partitions may be a problem for some people.

Amazon is currently allowing one VPC per AWS account but can be persuaded to permit more.

Amazon says it only takes a few simple API calls to create an isolated network, specify an IP address range (generally 16-16,384 IPs), partition the IP address space into a maximum of 20 subnets per VPC (though more can be had on request), create a gateway and basically launch EC2 instances into the isolated network.

The user then creates a secure VPN to bridge those AWS resources to his IT infrastructure. Cloud traffic bound for the Internet routes over the VPN where it is examined by the customer’s existing security and networking technologies before heading to the public Internet.

Customers can access their resources in the AWS cloud as if they were running in their on-premise infrastructure.

It’s not supporting EC2 security groups yet or Amazon DevPay AMIs but customers can launch their own AMIs including Windows AMIs. And the EC2 instances inside the VPC don’t have Internet-facing addresses yet.

The widgetry doesn’t support all VPNs or purely software VPNs yet. Amazon is open to validate-on-request.

Eli Lilly says it’s using it to support its pharmaceuticals research, collaboration and high performance computing, saving it “cumbersome configuration or management hassles.” So is Intuit.

Amazon also announced AWS Multi-Factor Authentication (AWS MFA), an optional, reportedly customer-requested layer of security that requires a second piece of information to confirm a user’s identity.

With AWS MFA enabled, users must provide a six-digit rotating code from a device in their physical possession in addition to their standard AWS account credentials before they can make any changes to their account settings.

Amazon expects to make MFA available this fall along with new billing features that let companies to link a group of AWS accounts into one bill representing (a potentially eye-opening view of) total AWS account usage.

• Amazon Launches Its Virtual Private Cloud
• Private Cloud Is Not the Cloud: Amazon CTO
• The Vocabulary of Cloud Computing