I never understood this integration of services... Why would anyone enable 'webservices' on the big sqlserver database server?
Though, for the people who aren't concerned that much about security, you can use it to expose an API which is directly calling into the proc API below it to consume/produce XML, because that's all it does I think. So mainly: you wrote an API for your db, and you expose the methods through a webservice interface.
Now, compare this webservice api with connecting to the same api via SqlClient. I can't really say I'd prefer the webservice api. THough it fits in the 'everything is a service' approach Microsoft is preaching for a couple of years now.