How do I reduce the database size on AWS RDS MySQL?
Write a script that will create a script
MYSQL_CONN=&quot;-hAmazonRDSDNSName -u... -p...&quot;
SQL=&quot;SELECT CONCAT('OPTIMIZE TABLE ',table_schema,'.',table_name,';')&quot;
SQL=&quot;${SQL} OptimizeTableSQL FROM information_schema.tables WHERE table_schema = 'signs'&quot;
SQL=&quot;${SQL} ORDER BY (data_length+index_length)&quot;
mysql ${MYSQL_CONN} -AN -e&quot;${SQL}&quot; &gt; /root/OptimizeAllTables.sql
less /root/OptimizeAllTables.sql

When you are satisfied that the script will do the job then do this:
mysql ${MYSQL_CONN} &lt; /root/OptimizeAllTables.sql

Give it a Try !!!
CAVEAT
Since the default for innodb_file_per_table is ON, each InnoDB table being optimized will actually have its .ibd file shrunk. Any MyISAM tables (which I hope you don't have) will also have their .MYD and .MYI files shrunk as well.
UPDATE 2012-09-18 18:19 EDT
I just tried the following:

Created Instance1 with 5G Disk
Modified Instance1 to 10G Disk
Modified Instance1 to 5G Disk (error message : Requested storage size (5) cannot be less then the current storage size (10))
Create Instance2 with 5G
Loaded Instance1 with 2MB data
Created Snapshot of Instance1 (same size : 10G)

If I restore the snapshot, it creates a third Instance. DB Snapshot must be the whole Server Instance, not a dump of any kind.
You will have to do the following messy procedure:

mysqldump the data from the 20GB Instance
Create a New 10G Instance
load the mysqldump into the new 10GB instance
verify all the data you want is present
destroy the old 20GB

At step 4, please run this Big Storage Engine Space Query on both the 20GB and 10GB instances
SELECT IFNULL(B.engine,'Total') &quot;Storage Engine&quot;,
CONCAT(LPAD(REPLACE(FORMAT(B.DSize/POWER(1024,pw),3),',',''),17,' '),' ',
SUBSTR(' KMGTP',pw+1,1),'B') &quot;Data Size&quot;, CONCAT(LPAD(REPLACE(
FORMAT(B.ISize/POWER(1024,pw),3),',',''),17,' '),' ',
SUBSTR(' KMGTP',pw+1,1),'B') &quot;Index Size&quot;, CONCAT(LPAD(REPLACE(
FORMAT(B.TSize/POWER(1024,pw),3),',',''),17,' '),' ',
SUBSTR(' KMGTP',pw+1,1),'B') &quot;Table Size&quot; FROM
(SELECT engine,SUM(data_length) DSize,SUM(index_length) ISize,
SUM(data_length+index_length) TSize FROM
information_schema.tables WHERE table_schema NOT IN
('mysql','information_schema','performance_schema') AND
engine IS NOT NULL GROUP BY engine WITH ROLLUP) B,
(SELECT 3 pw) A ORDER BY TSize;

You will see how much wasted space disappeared when migrating the mysqldump to the new 10GB Instance. This will definitely defragment all InnoDB tables. You may need to run the above script (/root/OptimizeAllTables.sql) I gave you above to run OPTIMIZE TABLE on all the tables in the signs database once a week to keep the .ibd as small as possible. You can also run the Big Storage Engine Space Query to Monitor when it starts approaching 10GB.