Map service performance and functionality
When you publish a map service using the Map Service Publishing toolbar in ArcMap, ArcGIS creates a map service definition (.msd) file that is placed in your server input directory. An MSD-based map service uses a fast drawing engine introduced at ArcGIS Server 9.3.1. In some ESRI literature, you may also see it called an optimized map service. MSD-based map services, as well as the toolbar, are described in detail in Publishing optimized map services.
To allow the fastest drawing possible, MSD-based map services support a commonly used subset of layers and functionality. Most vector and raster data types are supported. See Supported functionality in MSD-based services for a full list.
If your map contains unsupported items, they will be listed as Errors when you analyze your map with the Map Service Publishing toolbar. Until you resolve the errors, you will not be able to publish your map service in ArcMap or use the fast-drawing engine associated with MSD-based services.
If you choose not to resolve the errors, you can still use Manager or ArcCatalog to publish your original map document (.mxd) as a map service. This MXD-based map service does not take advantage of the faster drawing introduced at ArcGIS Server 9.3.1. To achieve the best performance, you should still resolve as many of the errors and warnings as possible.
MSD-based services not only draw faster but also have increased antialiasing options for drawing smoother line and text edges. MSD-based services can apply antialiasing both for dynamic map requests and when creating cache tiles. MXD-based services can only apply antialiasing when creating cached tiles, and the process is generally slower than with MSD-based map services.
The ArcGIS Desktop Help contains more detailed information about using the Map Service Publishing Toolbar to author, analyze, and publish your map. Specifically, see the section "Publishing optimized map services".
Map service caching for performance
To achieve the optimum performance expected by Web map users, you should create map caches for as many of your map services as possible. A map cache is a collection of prerendered map tiles that can be used for rapid display of a map services. Cached services display quickly because the map image does not have to be drawn on the fly; the cost of drawing the image is paid only once when the cache is created.
Because cache tiles are not automatically updated when your data changes, caching is most appropriate for basemaps that don't change often. However, you may be able to cache even some of your dynamic maps if you set up a periodic cache update schedule.
See the Map caches book to learn how to plan, create, and maintain map caches.