Web 2.0 is a commonly used term, it is also misunderstood. This is often because it is used by marketing types that like to use buzzwords to make it seem as though they are up to date and know what they’re talking about… As an online marketing professional that has worked with traditional marketing types, I can say first hand that most marketing types like hype, buzzwords and so on, rather than real insight or knowledge in a particular area. Luckily I am from a design/technical background so I am less prone to jumping on the bandwagon of squeezing in as many acronyms as possible into a post.
I have witnessed a few “Online” marketing types trying describe web 2.0… Usually it is a list of sites like: http://www.youtube.com/, http://www.wikipedia.com/, http://www.del.icio.us/, http://www.digg.com/ and so on. While this could be considered an answer, there is a failure to acknowledge the key concept of web 2.0 and this is where a genuine Online Marketing type (i.e. yours truly!) can explain concepts better.
Web 2.0 is not some kind of new standard or software update like IE 7.5, it is not just a list of recent sites. What it does mean is using the Internet to its strengths, interactivity to benefit the user, users as publishers and giving users the chance to air their own views and offer feedback on their user experience. Think of web 2.0 as an attitude to making use of the strength of the web rather than a fixed set of functionality or websites and you should have less difficulty explaining it, and developing it!