A web application is basically an HTML version of a standard user interface.
Because it's HTML-based, it isn't as rich, but you have the concept of the
lifetime of the application rather than a particular view (i.e. when you go
from screen to screen, generally, your choices, etc. are maintained
throughout your session.) A web service is really just a remote API that
allows for the passing and receiving of objects regardless of language, as
objects are described in XML, rather than a language-specific format. Web
service calls are inherently stateless (make two calls, and each call will
have a different session), although you can enable session usage. There is
a caveat to that (each call *is* a new session, but with client coding, the
sessions can be remapped to the original)
In a nutshell, one is a true user interface, and the other is an API.