Services are started during the operating system boot process, and load from 
executable files like other programs.  The difference is that once they are 
started, they stay running in the background until they are manually turned 
off.  This way, they can perform whatever function they need to perform 
without having to be manually invoked by the user.  
The downside of this, of course, is that services consume system resources, 
notably memory.  The more services you have open, the greater the initial 
overhead on your system.  
Potentially worse is the fact that standardized sets of 
services that are always present by default (such as the base list of services 
loaded by Windows XP) are well known, and their presence on the vast majority of 
XP systems can (and has) made certain network services vulnerable to viruses, 
Trojans, spyware and exploits.  The sheer complexity of Windows XP is the 
main reason why Microsoft seemingly has so much trouble securing it.  Service Pack 2    went a 
long way towards rectifying these issues, closing down several little-used 
services that might present security issues, like the Remote registry editing 
service.
The difference between services and 
processes     
You've looked at the list of services running on your system by now, and you 
understand that these services are applications running behind the scenes, but 
now for a puzzling thing… Press CTRL+ALT+DEL to bring up the Task Manager Window 
and click on the 'processes' tab

      
             
 Hmm, if all those services are loaded in the background, why 
aren't they represented on this list?  The processes tab shows every piece 
of software currently running within your Windows application, so surely the services 
you've seen should be here too?  The quick answer to this is that 
they are here, just not in the form you are expecting. 
        
            
The processes tab only displays the .EXE executable file for each application 
that is running on your Windows XP system.  Remember when we said that 
services are loaded with an executable file like any other program?  
      
             
            
     The thing is, certain executable files (like 
SVCHOST.EXE, which should appear several times in the process list) start up 
multiple services.  Also, in most cases the name of the executable file in 
the process list is not representative of the service(s) it starts.  
We can find out more about a service that is running by going back to the 'services.msc' window and double 
clicking on any 'started' service.  Try the 'computer browser' service as 
one example.

Look at the 'path to executable' box.  Recognize that .exe file?  
The browser service is just one of many services started by the 'SVCHOST.EXE' 
file which runs as a process when Windows boots up.
To recap, services are applications that run in the background, while 
processes are the actual operations that the computer is currently working 
on.  One process can be responsible for several running services, as in the 
case of the SVCHOST.EXE process.