MagicService is the service which enables to run component's code under user permissions which are defferent from user permissions of main code.
MagicService can be used to work with MagicCrypt component. If you try to use MagicCrypt under IIS5 with Application protection medium or high you will fail. That is because of permissions of the code. Most probably that you code will be run under IWAM_<HOSTNAME> user and this user has no permissions to connect Cryptographic Service Providers and so MagicCrypt component doesn't work. The solution is to run MagicCrypt code under other user. MagicService enable to run MagicCrypt under any user you want.