No, it does not mean that at all. Where are you getting this idea from?
> Users of a service only have to worry about the API that it exposes
Users of a library only have to worry about the API that it exposes too. What kind of libraries have you been using?
> Note that a service equivalent to libpng should probably not exist and be a library instead. A more reasonable service would be a wishlist service that keeps track of every customers wishlist and sends notifications to customers when products on their wishlist get discounted or are back in stock.
What's the difference between the two? The only difference that I can see is that the libpng and libwishlist wouldn't waste a network round-trip and lots of serialization and deserialization compared to a png service or whishlist service.