Cheryl Simmons has posted a table that summarizes some of the basic HTTP capabilities of Silverlight 3 and whether browser or client HTTP handling supports the capability.
In previous versions of Silverlight, the browser handled all the HTTP communication for the Silverlight plug-in. The browser HTTP stack works well but has some limitations including the HTTP methods you can use and the response codes that are accepted. In Silverlight 3, you can opt-in to have the Silverlight client perform the HTTP handling. By opt-in, I mean, if you don't specifically choose the client to perform HTTP processing, it will be done by the browser, just like it always has been. However, if you decide you need to call REST services, you can easily do this with Silverlight3 by opting in to the client HTTP stack.