So I have been running the numbers for Azure and RackSpace Cloud Servers and found that RackSpace is substantially cheaper, less developer investment (no custom programming), and RackSpace offers RackSpace Cloud Files if you need a substantial storage solution for your site. It almost seems too good to be true, what am I missing?
Amazon?
See: http://aws.amazon.com/ec2/ and http://aws.amazon.com/s3/
Pricing: http://aws.amazon.com/ec2/#pricing and http://aws.amazon.com/s3/#pricing
I'm not sure exactly what you're asking here, but one key difference is that Azure has a much larger infrastructure and support for servers in 21 countries, with an additional 21 slated this year, whereas RackSpace Cloud only has servers in the US with the UK slated for later this year.
Other than that, if you're just looking for some cheap scalable hosting then you're probably not missing much by going with something like RackSpace. But Azure is more than that.
There are also a number of additional services available for integration with Azure, such as CRM, SharePoint, SQL Azure, Live. And also a number of development APIs and services, and AppFabric for ineroperability. For developing scalable enterprise applications they aren't really comparable.
I've been using RackSpace cloud rather than Amazon because for small instances RS is less expensive. The service has been rock solid.