The following is an excerpt from ESRI ArcGIS Desktop Help
The Internet Servers folder in ArcCatalog lets you add and manage connections to ArcIMS Internet servers. ArcIMS is an ESRI product that enables organizations to put maps and data on the Internet.
When you connect to an ArcIMS server, you'll be able to browse the services available on that server. These services enable you to access maps and data over the Internet as 'live' data sources, without having to download them to your computer first. So for example, if you add an ArcIMS service to ArcMap as a layer, ArcMap will automatically retrieve the data for the service over the Internet each time that layer is drawn.
ArcIMS image service takes snapshots of the data on a server and delivers them to you over the Internet as images. Because the snapshots are being delivered as images, you can work with the data in the service but you can't export it locally or change the symbology. When you add an image service to ArcMap, you'll see one new layer in your map (an 'ArcIMS Image Service layer'). This works much like a group layer because you can turn the individual sublayers it contains on or off; unlike a group layer, it can't be broken apart into its constituent sublayers. The sublayers in an ArcMap image service layer can include both feature data and raster data.
ArcIMS feature service streams the actual features to you over the Internet, similar to the way that audio and video are streamed. Each feature service contains one or more ArcIMS feature classes. A layer based on an ArcIMS feature class works the same as any other feature layer. An ArcIMS feature class is simply another feature data source for a layer, just as a shapefile is a feature data source for a layer. If you add an ArcIMS feature service to ArcMap, you'll get a new group layer containing one sublayer for each of the feature classes in the service. If you just add one feature class to your map from an ArcIMS feature service, you'll just get one layer. As their name suggests, ArcIMS feature services cannot contain raster data.