I am doing research in ecommerce and focusing on Product & Service Customization issue I am seeking all of your suggestion and opinion regarding this issue. I want to know about
1) what is product and Service customization in Ecommerce
2) Some good example of site covering this issue.
3) Some worst example as well.

I think you're talking about something like a "configurator" script?

It's where, rather than listing every variation of a product and letting a customer choose one, you let a customer make upgrades or changes to a product before ordering

no customization;
size 11 brown shoe
size 11 black shoe
size 10 brown shoe
size 10 black shoe
size 9 brown shoe
size 9 black shoe

With customization;

Shoe (drop down box to select color)(drop down box to select size)

The best and easiest example is the first example. When dell offered their first computer customized though an online form, they were the first company to allow customers to easily modify a product through a website. If you go to their site (or any PC manufacturors site) you'll see very complex product customization. You pick a type com computer, then a series, then a model, then it generates a base configuration. You can modify it by upgrading/downgrading every individual part, or add warranty and instalation services, to meet your needs.

A more service oriented example would be a good web-hosting site that let's you customize your plan online (add extra domains, support package, more storage, better bandwidth, ect,...).

I can't think of a really bad example at 4am, anybody got one?