I'm totally new in Amazon's ec2. I use Windows XP on my computer. If I create a Linux instance, can I install MySQL on it?
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You can consider Amazon's EC2 to be essentially a VPS. Once you launch your instance, you will have full root access to it, via SSH. The instance will be setup with the keypair you assign to it, and which you will use to access it.
On Windows XP, you will likely use PuTTY as your SSH client. The key you get from AWS needs to be converted in order to use with PuTTY. Amazon provides instructions on this here.
Once you have gained access to your instance, you can install MySQL in the same way you normally would on the linux distribution you chose.
For instance, on a RHEL/CentOS/Amazon Linux distribution:
You can do pretty much anything you want to your instance - including things like changing the root volume (and operating system), install anything you want (compile code, use a repository, etc), network your instances together, adding multiple volumes, etc.
If you are just starting out with EC2, you should look over the getting started guide.