This is a question I get asked a lot and unfortunately, as is typical with all things Internet, there is no true fixed definition.
User-generated-content (UGC) and Asynchronous Javascript and XML (AJAX) are just two of the terms that get bandied around when trying to nail down just what Web 2.0 is.
Recently a friend of mine, whilst preparing for a job interview, asked me about this and I thought I'd better do some research to give her the most comprehensive answer I could. Considering she landed the job, I think I did ok!
Here then is one of the best explanations I've found for the meaning of Web 2.0, even if it is already a year old...
What it means to be Web 2.0 by Satyajeet Singh
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