I am asking this in very general sense. Both from cloud provider and cloud consumer's perspective. Also the question is not for any specific kind of application (in fact the intention is to know which type of applications/domains can fit into which of the cloud slab -SaaS PaaS IaaS).
My understanding so far is:
IaaS: Raw Hardware (Processors, Networks, Storage).
PaaS: OS, System Softwares, Development Framework, Virtual Machines.
SaaS: Software Applications.
It would be great if Stackoverflower's can share their understanding and experiences of cloud computing concept.
EDIT: Ok, I will put it in more specific way -
Amazon EC2: You don't have control over hardware layer. But you can take your choice of OS image, Dev Framework (.NET, J2EE, LAMP) and Application and put it on EC2 hardware. Can you deploy an applications built with Google App Engine or Azure on EC2?
Google App Engine: You don't have control over hardware and OS and you get a specific Dev Framework to build your application. Can you take any existing Java or Python application and port it to GAE? Or vice versa, can applications that were built on GAE be taken out of GAE and ported to any Application Server like Websphere or Weblogic?
Azure: You don't have control over hardware and OS and you get a specific Dev Framework to build your application. Can you take any existing .NET application and port it to Azure? Or vice versa, can applications that were built on Azure be taken out of Azure and ported to any Application Server like Biztalk?
Good question! As you point out, the different offerings fit into different categories:
EC2 is Infrastructure as a Service; you get VM instances, and do with them as you wish. Rackspace Cloud Servers are more or less the same.
Azure, App Engine, and Salesforce are all Platform as a Service; they offer different levels of integration, though: Azure pretty much lets you run arbitrary background services, while App Engine is oriented around short lived request handler tasks (though it also supports a task queue and scheduled tasks). I'm not terribly familiar with Salesforce's offering, but my understanding is that it's similar to App Engine in some respects, though more specialized for its particular niche.
Cloud offerings that fall under Software as a Service are everything from infrastructure pieces like Amazon's Simple Storage Service and SimpleDB through to complete applications like Fog Creek's hosted FogBugz and, of course, StackExchange.
A good general rule is that the higher level the offering, the less work you'll have to do, but the more specific it is. If you want a bug tracker, using FogBugz is obviously going to be the least work; building one on top of App Engine or Azure is more work, but provides for more versatility, while building one on top of raw VMs like EC2 is even more work (quite a lot more, in fact), but provides for even more versatility. My general advice is to pick the highest level platform that still meets your requirements, and build from there.