Tim O’Reilly in his article What Is Web 2.0? attempts to clarify Web 2.0 (the term was first coined at a conference brainstorming session between O’Reilly and MediaLive International, which also spawned the Web 2.0 Conference)
From what I understand, Web 2.0 is the World Wide Web as we know it today.
Focus has changed from delivering products to delivering services. e.g Netscape and its browser to Google, its search engine and email service.
The rising popularity of programming languages like PHP, Perl and databases like mySQL along with the release of Open Source software has put the normal (read non-geek) user in control. The rising number of blogs and wikis proves this point.
Today the visitor to your site is not just a user, but a co-developer. A wiki is a great example of this, where users can edit and add content to the wiki easily.
Another good example is the blog, where visitors can comment on your entries.
Yet another “product” of Web 2.0 is the multi-device structure of applications. Applications today not only run on your PC but also your hand-held device like the Palm or your mobile phone.
One more shift is the way content is today notified to the user. RSS has replaced Newsletters in many ways. Even I removed the newsletter from my blog and have focussed on distributing my RSS feeds.
There are lot of examples like this and I will let you read them in detail from Tim’s post.
But to sum up, the web has changed and it is time for us to rise up and meet the new standards and challenges this change has brought about in order to ensure our survival.