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This video tutorial teaches how to create a custom Amazon Machine Image (AMI) from an EC2 instance. An AMI contains all the information needed to boot an EC2 instance with custom software, acting as a virtual machine template. Creating your own AMI is important for building infrastructure with EC2 auto scaling groups, which require self-configurable instances to dynamically scale up or down according to application needs. AMIs serve as the basic unit for deployment, allowing auto scaling groups to boot new custom instances as needed.