Sounds like you have some reading
to do, but I'll give you a quick run down.
I can create a web service on a server. That web service will have a URL, just like an HTML page would have. The web service can expose several web methods. When you send XML to the web service URL, part of the XML specifies which web method to use. The XML also contains any parameters you want to send to the method. The XML gets deserialized by the .Net Framework and the method then gets called on the server and the server does some processing. Then the method on the server returns some values, which get serialized into XML that is sent back to the client that originally sent the XML to the server. The client then deserializes that XML and does whatever it wants with the data.
An example usage of a web service would be to provide weather data. The web service would have a web method that would return information about weather in a certain region. That region could be passed into the web method as a parameter.