Here's an interesting article on SaaS vs. PaaS vs. IaaS. http://news.cnet.com/8301-19413_3-10140278-240.html
The general view is that the market for internet-enabled services is becoming segmented in a way similar to the seven-layer networking model. Software-as-a-Service is essentially user-facing, consumer-ready applications deployed on the internet. E.g., Salesforce.com is SaaS for customer relationship management. Platform-as-a-Service is a layer below that: something you'd use to build SaaS applications. Force.com is an example. Infrastructure-as-a-Service is yet another step closer to the metal: it's CPU's and storage and bandwidth. AWS (Amazon Web Services) is an example.
Each layer offers a different set of functionality to a different part of the value chain, and developers would stack layers on top of one another to deliver a finished product. This theme of increasing abstraction and layering appears often in the computing world (think assembler -> C++ -> operating system -> programs), so it's natural that such differentiation is emerging on the 'net as well. The business models for each layer are likely to look very different from one another.
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