"Web 2.0" is a very nebulous phrase, I think, which describes a spectrum of patterns in web application development.
I gather there are distinctions in implementation and use. The content is typically more engaging of the user, allowing users to modify existing or submit their own. From a technical perspective "Web 2.0" seems to be distinguished by its need to enable this interactivity. So, increased occurance of postbacks, asynchronous JavaScript, or Flash applications to communicate the user's input to the server.
With it defined, I would say social networking sites are certainly "Web 2.0" and were even to an extent responsible for the trend.
On the other hand, I might see a "Web 2.0" case for a JavaScript widget which, say, printed the current time or weather from a remote server based on IP address lookup, but accepted no input at all from the user. The widget is actually less user-interactive than some "Web 1.0" content, but from an implementation perspective it would be very similar to the highly interactive content which non-technical users attribute to "Web 2.0".