A "Windows Service" is an application that is controlled by the Service Control Manager. Services are special types of applications that typically run "in the background" with no user interface. The Service Control Manager allows you to set the service to start automatically when Windows starts, what to do if the service stops unexpectedly, and other tasks that relate only to services.
An example of a Windows Service is the DHCP client. The DHCP client is used to get an IP address from your network's DHCP server. If your computer does not have an IP address, it will be unable to send or receive network information. The DHCP client service starts as soon as you start Windows, gets your IP address, and handles all tasks associated.