You have probably gotten this already figured out, but I'll put my two-cents in anyway.
- In your MVC application
- Preferably, yes
The WebApi does not need to be in your MVC application, but it's easiest if it is. If you aren't using MVC, and instead using WebForms, or WPF, etc., then WebApi can be in it's own project. But either way, it should directly reference the service layer methods.