More simply, Web 2.0 is about the shift from network search economies, which realize mild exponential gains - your utility is bounded by the number of things (people, etc) you can find on the network - to network coordination economies, which realize combinatorial gains: your utility is bounded by the number of things (transactions, etc) you can do on the network.
The point is that this shift is combinatorial - each person can do X activities in a combinatorial network, and it's combinations of these activities that make value explode. Contrast with a exponential network, where it's the number of people on a network that create value. That is, a relationship between any two people is 1:1 in an exponential network, but many to many in a combinatorial network. It should be intuitive to you that the former kind of network has more potential for value creation.
I invest in seed and pre-seed NYC startups at Brooklyn Bridge Ventures. Native Brooklynite, 11x triathlete, 2x 70.3, 4x marathoner, softball player, hockey goalie. Check out my This Week in Startups interview or check out my bio here. Also, this is me SEOing myself by linking to Charlie O'Donnell, and Charlie O'Donnell and more Charlie O'Donnell. PR people, do not pitch me to cover your story, as this is my personal blog. I'm not a journalist.