<p>I am bit confused about ADO.Net Data Services.</p>

<p>Is it just meant for creating RESTful web services? I know WCF started in the SOAP world but now I hear it has good support for REST. Same goes for ADO.Net data services where you can make it work in an RPC model if you cannot look at everything from a resource oriented view.</p>

<p>At least from the demos I saw recently, it looks like ADO.Net Data Services is built on WCF stack on the server. Please correct me if I am wrong.</p>

<p>I am not intending to start a REST vs SOAP debate but I guess things are not that crystal clear anymore.</p>

<p>Any suggestions or guidelines on what to use where?</p>

In my view ADO.Net data services is for creating restful services that are closely aligned with your domain model, that is the models themselves are published rather then say some form of DTO etc.
Using it for RPC style services seems like a bad fit, though unfortunately even some very basic features like being able to perform a filtered counts etc. aren't available which often means you'll end up using some RPC just to meet the requirements of your customers i.e. so you can display a paged grid etc.
WCF 3.5 pre-SP1 was a fairly weak RESTful platform, with SP1 things have improved in both Uri templates and with the availability of ATOMPub support, such that it's becoming more capable, but they don't really provide any elegant solution for supporting say JSON, XML, ATOM or even something more esoteric like payload like CSV simultaneously, short of having to make use of URL rewriting and different extension, method name munging etc. - rather then just selecting a serializer/deserializer based on the headers of the request.
With WCF it's still difficult to create services that work in a more a natural restful manor i.e. where resources include urls, and you can transition state by navigating through them - it's a little clunky - ADO.Net data services does this quite well with it's AtomPub support though.
My recommendation would be use web services where they're naturally are services and strong service boundaries being enforced, use ADO.Net Data services for rich web-style clients (websites, ajax, silverlight) where the composability of the url queries can save a lot of plumbing and your domain model is pretty basic... and roll your own REST layer (perhaps using an MVC framework as a starting point) if you need complete control over the information i.e. if you're publishing an API for other developers to consume on a social platform etc.
My 2ø worth!