I am trying to get my head around the concept of ADO.NET Data Services. Why is there a need for such a component and what was wrong with web services. I did a search and found this interesting explanation by Mike Flasko. Here is his explanation (Easy for me to understand!!!).
In general the goals of ADO.NET Data Services are to create a simple REST-based framework for exposing data centric services. We built the framework in part from analysis of traditional websites and then looked at how architectures were changing with the move to AJAX and RIA based applications. One key observation the team had was that in traditional approaches to web development the information exchanged between a client (ex. a webbrowser) and the mid tier was a combination of presentation + behavior + data (ex. HTML file with javascript and inline HTML tables of data) and that the core interactions to retrieve raw data was between the mid-tier and backend store (ex. SQL server or other). When we looked at RIA, AJAX, smart client, etc applications it became apparent that these architectures pushed much more "smarts" to the client tier where the client first retrieves the presentation + behavior information (as a DLL in the case of a Silverlight application) and then as the user interacts with the client application, the app turns back (ex. background async call) to the mid-tier to retrieve the data needed to drive the user experience. This is nothing new (separation of presentation + behavior from data), but its interesting to note it now not only a best practice but mandated in the architectures of today’s web and RIA apps. From this we looked at how such clients could consume data from the mid-tier today and how could we help improve the experience for the developer. A few areas came up:
1)Creating and maintaining rich data oriented services with current approaches requires a significant developer investment
2) Building generation purpose client libs/tools with current approaches to data centric services is hard
For #1, imagine you wanted to expose the data in your CRM database to you client tier application. Further assume you want to enable typical application scenarios like retrieving sorted views of the data, paging over the data, filtering, etc. To expose this data as a set of callable remote methods (using current approaches to developing web services) you would need to write a large number of methods to expose each of the entities in your CRM DB (customers, orders, etc) and then add additional methods for each to retrieve entities by key, sort them, page over them, etc etc. ADO.NET Data Services, addresses this issue by allowing you to declaratively state the contract of such a data centric service, by telling us the schema of the data and having the data services technology automatically create the required remote endpoints, enabling paging, sorting, etc with no code from the developer. Then as you change your data model, your service endpoints also change.
For #2 above, an interesting artifact of a REST-based approach to web services is that it promotes creating a uniform interface. That is, how you address items in an ADO.NET Data Service (i.e. how to construct URIs), how to interact with data (using HTTP verbs), etc is the same across any ADO.NET Data Service, regardless of the data it exposes. This uniform interface enables code reuse against your web services such that one can create reusable client libraries and UI widgets for all their services. For example, the ADO.NET Data Service team is doing this by shipping .NET , Silver light, AJAX, etc libraries which can talk to any data service. In addition, this feature (uniform interface) enables us to add features such as LINQ to ADO.NET Data Services since the translation of LINQ query statements to URIs is stable and well known.
This is already probably a bit too long 
, but in addition to the items noted above, additional advantages of REST-based approaches also apply such as rich integration with HTTP such that you can leverage existing HTTP infrastructure (ex. HTTP Proxies) deployed at large ...
I hope that helps....
-Mike