Hello Sumaira,
The Microsoft Dynamics 365 web services allow external resources to interact with CRM data and with the metadata that defines the specific CRM instance to which you’re connecting.
There are two web services exposed by CRM:
The Web API was introduced with version 8.0 and was incrementally updated to provide parity with the Organization service.Compared to the Organization service, the Web API provides better compatibility across a wide variety of programming languages, platforms, and devices.
The Web API implements the OData (Open Data Protocol) v4. OData is an OASIS standard for building and consuming RESTful APIs over rich data sources. You can learn more at the OData protocol and the OASIS standard websites.
Eventually the Web API will replace the Organization service and Organization Data service but both of these existing web services will be available to enable a gradual transition to a single Web API. The Web API should be your first choice for new development.
More information: Use the Dynamics 365 Customer Engagement Web API.
This is the primary web service used to access (CRUD operations) customer, sales, marketing, and service data; in addition, it exposes metadata that defines the specific “structure” of the CRM organization that you’re accessing.
IDiscovery
The Organization service is optimized for use with .NET. There are a set of .NET assemblies and tools to allow you to generate strongly typed classes and proxies that streamline the development process and enjoy a better development experience using Visual Studio.
Business logic that runs in plug-ins or workflow assemblies on the server expect to use the Organization service. Input and output parameters use specific classes defined with the assemblies that support the Organization service.
More information: Use the Dynamics 365 Customer Engagement (on-premises) Organization service
- Organization Data service
The Organization Data service, also sometimes known as the “OData” or “REST” endpoint. This service implemented the OData v2 standard.
While this service will continue to be available as-is for years to come, we are deprecating it in Dynamics 365 Customer Engagement (on-premises). The Organization Data service has always been limited to performing create, read, update, and delete operations and never supported the ability to call specialized messages used in the Organization service, so it could never reach parity with the functionality of the Organization service.
This release of the Dynamics 365 Customer Engagement Web Services does not include information about the Organization Data Service. You can find information about the Organization Data Service in the documentation for the Dynamics CRM 2015 release at Use the OData endpoint with web resources.
Discovery web services provide a way for a client to detect which servers and organizations are available for a user to connect to based on their user account. You can choose to use either the OData V4 RESTful API or the SOAP based SDK assembly API to access the Discovery web service. The RESTful API provides the same benefits as the SOAP web service, and it is easier to consume for a wider range of programming languages, platforms, and devices.
More information: Discover the URL for your organization using the Web API or Discover the URL for Your Organization With IDiscoveryService Web Service
For Dynamics 365 Customer Engagement (on-premises) you can perform actions to manage your deployment programmatically using the Deployment web service. These are essentially the same operations you can perform on the server using the Deployment manager tool client installed on the server.
You can create, import, or delete organizations as well as apply certain settings in code. This may be useful when you want to automate certain processes if you are providing a hosting service or if you want to automate creation of environments for testing.
Important documentation:
Authenticate users in Dynamics 365 Customer Engagement
Authenticate users to Dynamics 365 Customer Engagement (on-premises)
Use Dynamics 365 Customer Engagement web services
Build Windows client applications using the XRM tools
Model-driven apps Developer Guide
Hope this helps :)