Web 2.0 – one of the strongest drivers today—is creating new forms of communication, causing drastic market shifts, seeing massive innovation and opening up endless opportunities for entrepreneurs to both develop and take advantage of the technology. There are various arguments about what exactly Web 2.0 encompasses. In general, it refers to a maturing of the internet, the next version of the web. Some of the Web 2.0 trends, such as user participation, are occurring across many media channels. The increase in the number of reality TV shows is one major example of this. Hit shows like American Idol and Dancing with the Stars extend user participation to the audience by allowing them to vote for contestants at the end of the shows.

The entry points of the web have also contributed to these trends. The door to information is mostly managed through major search engines and portals, such as Yahoo!, Google and MSN. These three entry points now rank search results mostly on the popularity of a website, which is affected by the number of links to the website from other websites. When people post content, they also promote it; the links back to their content begin to increase search engine rankings for sites with such user-generated content.

The popularity of YouTube, MySpace and Wikipedia further validates the importance of user-generated content. These sites either didn’t exist five years ago or were much smaller. All of these sites are predominantly tools for users to post content at no cost. These three sites in particular have come online and taken the internet by storm. YouTube, MySpace and Wikipedia currently rank fourth, fifth and 10th, respectively, in terms of traffic.

For entrepreneurs, Web 2.0 means more opportunities and better tools for running your business. No matter what type of business you own, you need to be using technology to your advantage. If you don’t, your competition will most likely crush you. As the web audience continues to increase and the use of other traditional media and advertising vehicles such as TV, newspapers and yellow-page directories continue to decline, the web becomes increasingly important for even non-technology businesses. For those of you with businesses that target younger audiences, this becomes even more important. Advertising via Google AdWords, Yahoo! Search Marketing and Microsoft adCenter is becoming essential for most businesses.

If you’re in any type of business where processes and procedures are important, you can use Web 2.0 technologies like wikis and service portals for collaboration. Web 2.0-based project and task management services can help make your employees much more efficient. Web 2.0 tools for collaboration also make it easier for smaller businesses to collaborate with customers and partners.

Customer relationship management tools are probably the best known Web 2.0 software that’s used as a service. Salesforce.com was one of the earliest innovators in using CRM software as a service. Meanwhile, Google Docs and Spreadsheets provide word processor and spreadsheet applications at no cost as part of Google Apps. Web 2.0 entrepreneurs continue to build out software services for functionality that only existed as packaged software before.

Web apps are hot. But what does this really mean for entrepreneurs? Three things:

1. Lots of room for start-ups: The barriers to entry are low, but the way to stand out is by solving a real customer problem. If a web app solves the user’s problem, he or she won’t hesitate to use it over traditional software.
2. Existing software companies beware: Because web apps replace the functions of traditional software programs sans occupied disk space, many PC users may decide to switch.
3. New tools for growing businesses: The myriad business tools in web app form, such as video, accounting, CRM and so on, can help businesses be more efficient, saving them money and making information accessible anytime, anywhere.
   As more and more people rely on their mobile phones and the web moves to wireless, the mobile apps industry is growing by epic proportions.

And the exciting part for entrepreneurs wanting to dial into this hot industry would be the millions in investment money flying around. Apple and Google have launched third-party mobile app markets already, and Microsoft is scheduled to release its version next year. The technology is only going to get better.

Parts of this article have been sourced from Michael Crichton’s State of Fear and Gary Reid’s articles on Mashable.