Pew Internet's Mary Madden and Susannah Fox today released the backgrounder "Riding the Waves of 'Web 2.0,'" which provides the sanest and most succinct definition of this term's evolution and use I've read. They write,
That the term has enjoyed such a constant morphing of meaning and interpretation is, in many ways, the clearest sign of its usefulness. This is the nature of the conceptual beast in the digital age, and one of the most telling examples of what Web 2.0 applications do: They replace the authoritative heft of traditional institutions with the surging wisdom of crowds.
I'm with them, here, but I'm not so sure about the "surging wisdom" part. All user-contributed content isn't all good all the time. But it is true that even if only some of it is good, the system works. YouTube users upload 65,000 videos a day, so even if 95% of it is junk, there are still 3,250 videos that are probably worth watching.
Andy Warhol famously quipped, "In the future everybody will be world-famous for 15 minutes." Now with user-generated content, the new maxim, perpetrated by David Weinberger and others, is "In the future, everybody will be world-famous for 15 people."