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Does it make sense to run a cloud on only one server? If so what are the benefits? Are there any nice tools managing my VMs (apart from virt-manager) even if I do not use the EC2 cloud?

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I run several kvm virtual machines on a couple of the servers that I'm responsible for at one of my places of work. I chose to set them up this way for a couple of reasons.

The configuration of each guest server is focused on the task assigned to it. I've set up one for internal websites, another for handling Samba shares, etc.) This also means I can make changes with one set of services without affecting the others.

In theory, I can move the virtual machine from one physical system to another without making a lot of changes. (I haven't ended up doing this much because the servers I have aren't currently running the same architecture.)

And, it is really easy to setup new virtual machines for trying out new configurations using the Virtual Machine Builder.

I don't know much about other tools for managing the virtual machines because I only use the vmbuilder and virsh command line tools which work well for my admittedly basic requirements.

Update: I might have misunderstood the question. My setup is just kvm virtual machines on individual servers, there is no "cloud" in the Ubuntu Enterprise Cloud or Amazon EC2 sense.

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As I said in another thread, when you're dealing with a single computer, can't really do "cloud" computing because at its core, cloud computing relies on scaling in some direction, be that more CPU power, more memory, disk, bandwidth, user capacity and to do that, you need multiple hardware units to be able to provision things...

In the case of the other thread, there isn't much point breaking up a server into VMs just for multiple services if they're all yours, there's just no benefit.

But to answer the question:

What is the difference between running VMs and a Ubuntu EC2 cloud?

Elastic provisioning is probably the biggest difference. Amazon have tons of hardware that you can bind your "instance" to, including hot-provisioning CPU time, RAM (IIRC) with an almost infinitely scalable disk platform (S3) behind it. Traditional VMs tend to come with fixed things that can be upgraded but require a VM restart.

A side effect of that, especially with Amazon's EC2 is you pay for what you use. This isn't always good as you can usually find a better value VPS if your machine is doing a lot of work.

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