According to wikipedia: The term Web 2.0 is associated with web applications that facilitate participatory information sharing, interoperability, user-centered design, and collaboration on the World Wide Web. A Web 2.0 site allows users to interact and collaborate with each other in a social media dialogue as creators of user-generated content in a virtual community, in contrast to websites where users are limited to the passive viewing of content that was created for them. Examples of Web 2.0 include social networking sites, blogs, wikis, video sharing sites, hosted services, web applications, mashups and folksonomies.
In simple words, is a website that allows you to create content like blogs i.e. wordpress.com, blogger.com, etc
They're sites that allow you to make a page for free. Then you can use that page to link to your main site. this gives your main page more backlinks and is supposed to help you rank higher in the SERPs. Search around on BHW for a list of these sites if you want to start using them.
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