How is a Reserved Instance different from an On-Demand Instance?
The only difference between a Reserved Instance and an On-Demand instance is that you pay a low, one-time payment and receive a lower hourly rate and a capacity reservation.
Reserved Instances and On-Demand Instances are mostly the same and they are launched and terminated in the same way i.e., they function identically once running.
When you purchase reserved instance, you are just getting into a billing contract with AWS & your existing running instance will start costing less (per hour) as soon as you make upfront payment.