Unless Google has legions of Oompa Loompas hiding in its server rooms running around retrieving data as queries come in, it's a product that provides a service: it does not scale linearly with the number of people working on it.
Put another way: each additional cleaning lady client consumes more of her time, and pays her more money in a fairly linear way. Google search users do not fit that pattern, and, more importantly, neither do Adwords customers.
It's pretty obvious that by "service" he means a business where you are paid per hour you work: all freelancers, consultants, and all other businesses where the owner is a critical daily employee.
Yes, that's not a typical word for the distinction, but you know what he means.
Do you understand what I am trying to communicate, or not?
It does not seem like a difficult concept, so cut out the "Comic Book Guy" routine. Go ahead and actually correct my terminology if you care to - furthering everyone's knowledge is always a plus - but otherwise you are not adding anything.
As far as I can tell, you were trying to use made-up words to say that Jason Fried was lying when he said he was inspired by his cleaning lady's business model because there was some particular difference between those two business models that you found significant but could not express except to vapidly define "services" as "that which cleaning ladies do" and "products" as "that which 37s is moving towards".
So I don't think they're made up at all, seeing as how they're in common use. It's probably true that there is not a black or white line between the two, and both can be good businesses, but I did think it fair to point out that cleaning is very much a "service" whereas 37 signals started out doing services (sites and so on) and moved towards products, which tend to scale up more.
