Service types are the different things you do for your clients that they are paying you for. They are used on Deals and Budgets and people track their time against them.
To set them up, go to Settings > Service types.
There will already be a list of default Service types in your account, but you can add new ones by clicking on Add service type.
You can also define for what purpose will this service type be used: It could be a service or an expense.
Service types can be deleted too, but be careful, people track time against them so you risk losing time entries if you delete a Service type that's in use within projects and budgets.