>There are a ton of references in the samples and help files to creating Web Services and Applications on the "localhost". On my machine, I don't seem to have IIS. Is it included in the VS.NET Professional package? Is there something special I am required to do to install it?

The VS install should tell you that need to install IIS if you want to use ASP.NET when you run it. IIS comes with Windows NT/2000/XPPro so you if use either of those, it should be on the Windows disks.