The MAPUNITS tag in ArcXML describes the map units of the data. The default value for this tag in ArcIMS Author and ArcExplorer Java (AEJ) is decimal degrees, even if the data is projected and has a projection file.
If the Map units for a service are not manually set to be the same as the data's coordinate system units, the ArcIMS layer will not be displayed in the correct coordinate space in ArcMap.
For example: An ArcIMS service uses data that has been projected in Lambert. The data's actual map units are meters, but the MAUPUNITS tag in the service axl file is set to decimal degrees by default. The service will not work correctly in ArcGIS.
Neither ArcIMS Author nor ArcExplorer Java automatically sets the MAPUNITS based on the projection file.
ArcGIS assumes the spatial reference for a service with map units of decimal degrees is Geographic.