Q: Why should I create separate cloud services for my virtual machines (VMs) in Windows Azure IaaS?

A: A VM hosted within Windows Azure IaaS must exist within a cloud service, and mulitple VMs can also be part of the same cloud service. Cloud services were previously the boundary of communication between services; however, with virtual networks it's now possible for multiple cloud services to use the same virtual network and be able to communicate with each other. The question, therefore, becomes when to create separate cloud services for VMs.

There is no definite answer. Consider that each cloud service has its own public IP address and so if services need to be published to the Internet with unique IP addresses, then separate cloud services would be needed. Additionally, if there are separate teams of users/developers who manage their own cloud services, then giving each group their own cloud service would make sense.

The only reason you would have to use multiple cloud services is if there are more than 50 VMs, which, at time of writing, is the maximum number of VMs in a single cloud service.