>Between components, I think you are actually passing a dataset object. Maybe .NET behind the scenes converts to XML, passes the data, and converts back to a dataset (which btw is cool if it really does this for you) but I have not seen anything that says this is the case.

The behavior of the dataset object will depend on if the client component and the server component are within the same AppDomain or not.

Within the same App Domain: This is the simple case. If you pass a dataset as a parameter to another object, just the reference will be passed. After all, if your dataset is 1 Megabyte, you just want a reference to it, you don't want to get a copy of the whole thing, especially if your intention is to make changes to it.

Between App Domains: If instead the server component is in another App Domain, or on another computer in the internet or intranet, this is the Remoting scenario where the object has to pass through an App Domain boundry. When an object crosses an App Domain boundry, its marshalling behavior comes into play. The DataSet class derives from MarshalByValueObject. The marshall by value behavior is to serialize the object into XML. That is why when you return a dataset from a web service, you get XML.

The other marshalling behavior is MarshalByRefObject, like the Component class. This will setup a Proxy/Stub pair. The calls will be marhalled to the remote object through the proxy to be executed on the server.