Reserved instances in Azure offer significant cost savings compared to on-demand instances but require a commitment to a one-year or three-year term, making them suitable for workloads with predictable usage. On-demand instances provide flexibility for unpredictable workloads but at a higher cost. Reserved instances are available for a variety of Azure services, not just virtual machines. The statement about reserved instances being always more expensive than on-demand is incorrect. Azure does allow for exchanges or refunds of reserved instances within the first 14 days under certain conditions, but this is not a universal rule without penalties.