Hi Ayesh,
For all apps for SharePoint, you must set up a Domain Name Services (DNS) domain name to provide a host name for the installed apps.
By using a separate domain name, apps for SharePoint are separated from SharePoint sites to prevent unauthorized access to user data and to reduce the possibility of cross-site scripting attacks.
The use of separate URLs for apps for SharePoint and SharePoint sites is called app isolation. You also need a DNS record so that the domain name can get correctly resolved.
The App Management Service is created by default after running SharePoint Product Configuration wizard.
You dont need to create the service. You just need to create the App Management Service Application.
Each app for SharePoint has a unique URL, which is made up of the app domain plus a prefix and an Apphash.
If you want to create and use Apps in a web application, then you need to set the service connection for the web application with App Management Service application.
More references:
https://technet.microsoft.com/en-us/library/fp161237.aspx
http://blogs.technet.com/b/mspfe/archive/2013/01/31/configuring-sharepoint-on-premise-deployments-for-apps.aspx
Thanks,
Victoria