Carole Chilton who works for Wells Fargo in the States started a good discussion on the "Business Architects" group in Linkedin recently; after many posts and extended discussions here are her conclusions which I think are quite helpful.
A business capability is an abstract but essential building block, designating a particular ability or capacity that a business posseses (or exchanges) to achieve a specific purpose or outcome, and describes what the business has the ability to do to create value for customers; for example, pay employee, ship product, or provide consultant.
Services are abstract yet inherently manageable entities requiring one or more capabilities that a business draws upon to create, provide, &/or support an instance of value to a customer or another service (i.e. a product, widget, or consulting).
Business capabilities are what a business can do to provide something of value to its customer - a service.
This reflects the views in an article that I myself wrote a couple of years ago. http://www.deversolutions.co.uk/capability-frameworks.pdf