Lets have an example scenario:
Client opens a web site and finds the sum of two numbers which he enters from the textboxes.Then clicks on the ADD button.Two parameters a
To add 2 no.s we write a web service, to subtract we write a diffrent web service, however calculator is an web application that uses add,subtract and many other webservices in combine.
Lets take an example of Google search. We can use Google search in two ways. First, we can visit http://www.google.com and put out query for search. Google the returns the result. Second, we can integrate Google Search in our websites with custom search API.
In first case Google Search is acting as web application while in second example it is acting as web service.
Here we can point out few differences,