According to Ben@AWS, Amazon Linux is based on RHEL 5.x and parts of RHEL6 and is binary compatible with RHEL 5.x and Centos5. The kernel is based on 2.6.34, and the image is engineered to conform to a cloud environment. Its goal is to serve as reference image of EC2 best practices.
Going forward, they will incorporate newer packages where appropriate. As it is updated they will add compatibility packages so that applications built on RHEL 5 will continue to work.