I'm using ArcMap 10.1 to publish a feature service. The labels show on the mxd, but not on the service (on a web application or on mobile application). Do I have to create an annotation layer or am I just not setting something up correctly in my mxd?
I don't think feature services display labels. You need to use a map service instead or create labels yourself with graphics. This was the case with 10.0 I'm not sure if anything changes at 10.1.
If you need the capability of feature services just add an additional map service layer just with labels displayed.