What do you mean by Windows Messenger Service?

These three terms (Messenger Service, Windows Messenger, MSN Messenger) are often confused by many people around the world, who are new to Windows XP. Let me explain each one briefly with examples:
Messenger Service
This Service transmits net send and Alerter service messages between clients and servers. This service is not related to Windows Messenger/MSN Messenger. If this service is stopped, Alerter messages will not be transmitted. If this service is disabled, any services that explicitly depend on it will fail to start.

Messenger Service has nothing to do with Windows Messenger/MSN Messenger

Windows Messenger
Windows Messenger is an Instant Messaging chat application (like MSN Messenger or AOL IM). Windows Messenger is included with Windows XP and is installed when you install the operating system.

MSN Messenger
MSN Messenger is an Instant Messaging chat application (like Windows Mesenger or AOL IM). MSN Messenger 5.0 is included with MSN 8.0 and is also available as a separate download. It is installed on your computer when you install MSN 8.0 or when you run MSN Messenger 5.0 Setup.

Note:

MESSENGER SERVICE is sometimes called Windows Messenger Service
Windows Messenger is Windows Messenger
MSN Messenger is MSN Messenger

So, why do I need two Instant Messengers of the same type?

To learn the differences between Windows Messenger and MSN Messenger see this Microsoft KB330117 section Differences between MSN Messenger 5.0 and Windows Messenger.