Below is  Richard MacNanus' definition of Web 2.0 and I think he gets it pretty good:

Richard's Web 2.0 Elevator Pitch

Web 2.0 at its most basic is using services on the Web. Some examples: Gmail for email, Flickr for photo-management, RSS for news delivery, eBay for shopping, Amazon for buying books. That's why the Web is being called a platform - because all of these services are being built and used on the Web. Why Web 2.0 only now though - hasn't Amazon been around since 1995? Why yes, but it's taken until 2005 for broadband and web technology to catch up and reach a 'tipping point' - the Web is fast becoming the platform of choice for developers, business, media, public services, and so on. So what do I get out of this "Web 2.0", you ask? The advantages of using the Web as a platform is that the services become more social and collaborative - and geographic boundaries are blown away. A lot of the content is actually created by users. For example all of the reviews and ratings entered into Netflix by its users help make it easier to find and filter the thousands of DVDs that are available on its website. Another advantage of using the Web as a platform is that services can be built using data and code from other services - for example Housing Maps is a "mash-up" of Google Maps and real estate listings from craigslist. So Web 2.0 provides services that people can contribute to as well as mix and match.