Currently Elastic Beanstalk only supports Python 2.6 projects out of the box. The .ebextensions/python27.config file does everything required to get Python 2.7 setup for your application on elastic beanstalk.
To test this out you can git clone this project.
Run:
eb init
eb start
Once the application is up and running vist the eb url in your browser and you should see this:
2.7.3 (default, May 18 2012, 22:11:36)
[GCC 4.4.6 20110731 (Red Hat 4.4.6-3)]
Happy days!
See blog post for more info: http://leetreveil.roon.io/getting-a-python-2-7-project-running-on-elastic-beanstalk