docs: update information about versioning language service and typescript

#754
exprienced a versioning issue that isn't really explained well by the
README docs. Update the documentation with a better overview of how we
load packages and the suggested approach.

Author: ayazhafiz

README.md

@@ -18,17 +18,21 @@ Download the extension from [Visual Studio Marketplace](https://marketplace.visu
 
 ## Versioning
 
-The language service extension uses the `@angular/language-service` package for its backend. This
-package is loaded either from the version bundled with the extension, or from the current workspace
-project the extension is running on. Due to the behavior of TypeScript below version 3.8,
-incompatible versions of the language service may sometimes be loaded. If you are using a version of
-TypeScript below 3.8, we suggest either
+The language service extension relies on the `@angular/language-service` and `typescript` packages
+for its backend. These packages are loaded, in order of priority, from:
 
-- Not installing `@angular/language-service` in your project (recommended; will fallback on the
-    version bundled with the extension)
-- Installing and keeping updates for the latest version of `@angular/language-service`
+1. The path specified by `angular.ngdk` and `typescript.tsdk`, respectively, in project or global
+   settings.
+2. _(Recommended)_ The version of these packages bundled with the Angular Language Service extension.
+3. The version of these packages present in the current workspace's node_modules.
 
-For further information, please see [#594](https://github.com/angular/vscode-ng-language-service/issues/594).
+We suggest **not** specifying neither `angular.ngdk` nor `typescript.tsdk` in your VSCode settings
+per method (1) above. If the `@angular/language-service` and `typescript` packages are loaded by
+methods (1) or (3), there is a potential for a mismatch between
+the API expected by `@angular/language-service` and the API provided by `typescript`. This could
+lead to a failure of the language service extension.
+
+For more information, please see [#594](https://github.com/angular/vscode-ng-language-service/issues/594).
 
 ## Installing a particular release build