Web 2.0 is a buzzword (some people think is a silly term) that references to all the new rich user experience web based applications and the technologies around them , maybe you have seem some of them like www.flickr.com, maps.google.com, www.wikipedia.com, del.icio.us, this blog itself , and the list goes on and on. Some of this tools allows non tech users to interact, share and create content that otherwise couldn't be possible.
In a few years desktop applications like spredsheets and word processors will be moved totally to the web, there are initiatives like wikicalc, numsum and writely, maybe they will not have all the same functionality of desktop apps but most of the people just use about 10% (or less) of Excel.
I read a very interesting paper about web 2.0 / web office, here is the link:
Web Office , worth a read.