What directory does a Windows Service run in?

I've created a very simple .NET Windows Service and installed it using InstallUtil.exe utility.

In the service I have a piece of code as such:

if (File.Exists("test_file.txt"))
{
   // Do something clever
}

I've created a file called test_file.txt in the same directory as the service but the commented part of the code is never being executed...?