I agree with a lot of what this blog has to say:

Virtual Identity Dialogue : Crossing the line between pages and applications

I especially like the counterpoints and the summation of that Web 2.0 is:

improved customer-driven interactivity

There are a lot of technologies and practices associated with Web 2.0, but the hype, especially from the business point of view, seems to be about the customer experience of using a web application.