Web 2.0 was a term popularized by Tim O’Reily, in this article:

http://www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web-20.html

This diagram explains it best, I think:

http://www.oreillynet.com/oreilly/tim/news/2005/09/30/graphics/figure1.jpg

However, due to it’s popularization, many marketing companies and startups now use the term for *anything* on the web. It gets used to describe a visual aesthetic (usually with lots of reflections and rounded corners). The term is so saturated now, that it has lost pretty much all meaning.

You’re best off just ignoring the term, and focusing on what makes sense for your business/software/project, whether that is "Web 2.0", or something else.

My understanding of Web 2.0 is that it is really a collective term that describes a number of new services and sites that are becoming very popular on the internet.

These sites can split into a number of categories:

social bookmarking sites
social media sites
social news sites

The one major thing they have in common is the sharing of user data, and the networking of the users that have supplied that data.

The site i’ve referenced may help you: