I have just transferred my blog from my local webserver to Amazon EC2 Free Linux server, Everything seems to be working now except for permalinks, I disabled and re-enabled them
For Ubuntu, change the "AllowOverride All" at the following location:
"The additional step I had to take was to edit /etc/apache2/sites-enabled/000-default.
In that file you'll find an AllowOverride setting for /var/www, saying "None".
Change the setting to say: AllowOverride All "
Credit to ljonas @ http://wordpress.org/support/topic/solved-permalinks-working-in-apache2-ubuntu-1010