Web 2.0 is not a recent term, it was coined by O’Reilly Media in 2004 to describe the transformation of Internet use. It’s a collective term that describes how usage of the Web has changed since its inception.
Originally, the Internet was used primarily for information that may or may not have originated in digital format and sharing it; for example, scanned documents, photographs or a simple web page that announced an event. The interaction with visitors was reading and viewing. Gradually, that model of the web grew into what is now called Web 2.0.
Web 2.0 is about collaboration and Web communities like social networking sites, Wikipedia, blogs and RSS feeds. It’s also about using the Web as a platform for applications, as opposed to using your desktop computer as the platform. Many applications required a download and installation of software on your desktop computer, and some had an optional Web component. Web 2.0 is only that optional Web component – but now as the full application. Think of the evolution of products like TurboTax, iTunes and email.
Visitors to your Web site now expect to interact with or contribute to your site in some way: through a blog conversation or posting, a review of a product, or by subscribing to content that is regularly and frequently updated. It’s more about the users owning data on the site and exercising control over that data, or at least being able to give their opinion about it.
O'Reilly describes classic Web 2.0-oriented applications as those that exist only on the Internet and derive their effectiveness from inter-human connections. His examples include Craigslist, eBay and Facebook; I would add the recently popular Twitter.
I hope this helps to shed a little light on Web 2.0; let me know if it helped!