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Web services are language independent way of communication through which different applications can exchange information over the internet. Java provides its own API to create web services.

There are two types of web services :
1. SOAP web services
2. RESTful web services

SOAP web services: SOAP stands for Simple Object Access Protocol. It is a language independent protocol which enables client applications to communicate with server application through the internet. It permits the only XML based information for sharing. It doesn't allow other data formats. java provides JAX-WS API for creating SOAP web services.

RESTful web services: REST stands for Representational State Transfer. It is an architectural style, not a protocol. It uses HTTP methods to implement the concept of RESTful web services. It allows different data format like HTML, XML, plain text, JSON. It is fast. It consumes less bandwidth and resources.

For more detail visit: http://www.java2blog.com/

Just to expand a bit further. You use SOAP for shearing objects, methods, functions or to exchange, update or delete data between different systems remotely via Serialization and XML.

REST on the other hand uses standard HTML Protocals for exchanging, updating and deleting data remotely. REST is better if you are just exchanging data only as it has less overheads unlike SOAP.