The term Web 2.0 is associated with web applications that facilitate interactive information sharing, user-centered design and collaboration on the World Wide Web. A Web 2.0 site gives its users the free choice to interact or collaborate with each other in a social media dialogue as creators in a virtual community, in contrast to websites where users (consumer) are limited to the passive viewing of content that was created for them. Examples of Web 2.0 include social networking sites (Facebook, Twitter), blogs (Blogspot), wiki (Wikipedia, WikiIndex), video-sharing sites (Youtube), hosted services and web applications.
A little History
The concept “Web 2.0” was started in a conference brainstorming session done by O’Reilly and MediaLive International in 2004. Although the term “Web 2.0” suggests a new version of using the World Wide Web, it doesn’t refer to any technical update specification but rather just a new way of approach to the softwares and applications on the web.
Early Brainstorming
In O’Reilly’s initial brainstorming, their sense of Web 2.0 was illustrated as:
If we suppose that Web 2.0 had a gravitational core, then you could visualize Web 2.0 as a set of theories and practices that ties together a solar system of sites that demonstrate some or all of those theories, at a varying distance from that core. The following brainstorming figure shows how the ideas could be radiated out from the core of Web 2.0.

Characteristics
Web 2.0 websites allow users to do more than just retrieve information. By increasing what was already possible in “Web 1.0”, they provide the user with more user-interface, software and storage facilities, all through their browser. Users can provide the data that is on a Web 2.0 site and exercise some control over that data. These sites may have an "Architecture of participation" that encourages users to add value to the application as they use it.
Examples of Web 2.0 vs. “Web 1.0”
To have a better and clearer view on how Web 2.0 evolved, we should take a look at some early examples: Netscape vs. Google and Encyclopedia Britannica Online vs. Wikipedia. A while ago, O'Reilly contrasted Web 2.0 with what they called "Web 1.0". They associated Web 1.0 with the business models of Netscape and the Encyclopedia Britannica Online.
In short, Netscape focused on creating software, updating it on occasion, and distributing it to the end users. O'Reilly contrasted this with Google, a company which did not at the time focus on producing software, such as a browser, but instead focused on providing a service based on data such as the links Web page authors make between sites. Google exploits this user-generated content to offer Web search based on reputation through its "page rank" algorithm.

Unlike software, which undergoes scheduled releases, such services are constantly updated, a process called "the perpetual beta". A similar difference can be seen between the Encyclopedia Britannica Online and Wikipedia: while the Britannica relies upon experts to create articles and releases them periodically in publications, Wikipedia relies on trust in anonymous users to constantly and quickly build content.
Technology
The web browser technologies typically used in Web 2.0 development are Asynchronous JavaScript and XML (Ajax), Adobe flash framework, and Javascript/Ajax frameworks such as Yahoo! UI Library, Dojo Toolkit, MooTools, and jQuery. Ajax programming uses JavaScript to upload and download new data from the web server without undergoing a full page reload.
Reference
O’Reilly, Tim, (2005), “What is Web 2.0?”, O’Reilly media,
http://oreilly.com/web2/archive/what-is-web-20.html
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