ADO.NET Data service is the next generation of data access layer within applications. I have seen a lot of examples using it directly from a UI layer such as Silverlight or Ajax to get data. This is almost as having a two tiered system, with business layer completely removed. Should DAL be accessed by the Business layer, and not directly from UI?
ADO.NET Data service is the next generation of data access layer within applications
I have no idea where you got that from! Perhaps you're confusing ADO.NET Data Services with ADO.NET Entity Framework?
One shouldn't assume that everything Microsoft produces is of value to every developer. In my opinion, ADO.NET Data Services is a quick way to create CRUD services, which maybe have a few other operations defined on the entity, but the operations are all stored procedures. If all you need is a database-oriented service, then this may be what you want. Certainly, there's relatively little reason to do any coding for a service like this, except in the database.
But that doesn't mean that ADO.NET Data Services "has a place in the overall design" of every project. It's something that fills a need of enough customers that Microsoft thought it worthwhile to spend money developing and maintaining it.
For that matter, they also thought ASP.NET MVC was a good idea...
:-)
ADO.NET Data Services is one more tool to be evaluated in order to move data.
.NET RIA Services is another one. Much better I would say.
I see ADO.NET Data Services as a low level services to be used by some high level framework. I would not let my UI talk directly to it.
The main problem I see with ADO.NET Data Services has more to do with security than with anything else.
For simple/quick tasks, in a Intranet, and if you are not too pick with your design, it can be useful. (IMO) It can be quite handy when you need to quickly expose data from an existing database.
I say handy, but it would not be my first choice as I avoid as much as I can the "quick and dirty" solutions. Those solutions are like ghosts, always come back to haunt you.
In my opinion other answers underestimate importance of ADO.Net Data Services. Though using it directly in your application brings some similarity to two tiered system , other Microsoft products such as .Net RIA Services , Windows Asure Storage Services based on it. On the contrary to the phrase in one of the answers "For simple/quick tasks, in a Intranet, and if you are not too pick with your design, it can be useful" it may be useful for public websites including websites in ASP.Net MVC.
Dino Esposito describes the driving force for Ado.Net Data Services in his blog
"ADO.NET Data Services (aka, Astoria)
Driving force: the need of building richly interactive Web systems. What's that in abstract: New set of tools for building a middle-tier or, better yet, the service layer on top of a middle-tier in any sort of application, including enterprise class applications. What's that in concrete: provides you with URLs to invoke from hyperlinks to bring data down to the client. Better for scenarios where a client needs a direct|partially filtered access to data. Not ideal for querying data from IE, but ideal for building a new generation of Web controls that breath AJAX. And just that."