The term Web 2.0 was originally coined by computer book publisher and CEO of O'Reilly Media Inc., Tim O'Reilly. Web 2.0 basically refers to the transition of websites from static HTML, brochure style pages to dynamic pages that incorporate web applications that users can interact with such as modules, gadgets, Mashups, RSS, blogs. It describes a second generation of the web that is focused on the ability for people to collaborate and share information online using those tools.
Web 2.0 has become a marketing term for web applications/services that enhance social media and a community. Websites the incorporate 2.0 applications allow companies to better communicate with their users, encourage interaction among those users, and results in data-driven marketing campaigns.
Watch a video we love: Web 2.0 ... The Machine is Us/ing Us on YouTube to see the evolution of the web.