First of all ask yourself:
- Who am I demoing this to?
- What do they want to get out of the demo?
Regarding "who", are they technical people? Business people? Smart people? Clueless people? Those are important things to understand before deciding how to demo the product (and shame on some of you readers for assuming the technical people are also smart and the business people are also clueless ;-)
If your audience knows what a windows service is, how they work in general, and roughly what yours is supposed to accomplish, you can jump in and explain the finer points of your solution. If that's not the case, you will want to start out by explaining that you have a solution to show them that is running all of the time waiting for new work to arrive, then automatically starts processing when that new work arrives... or whatever your windows service actually does. If this is what you're facing, try explaining it to your mom (assuming your mom isn't a programming wizard).
Regarding "what they want" from the demo, ask yourself if they want to know technically how the service is written and functions (what events trigger new work items? Does it have a DB back end? How is the service monitored for 24/7 availability?).
Do they care more about the business function? "OK so it can process time cards for employees as they are submitted. Can it also process time cards for contractors?"... that sort of thing.
Once you have figured out WHO and WHAT, look over the advice from the other posters and see what is a good match.