The NY Times has an article by tech writer, David Pogue  titled Are You Taking Advantage of Web 2.0? 
While it's a very good article (albeit the term 'new media' is really more apt than his use of the term Web 2.0) it may be a little myopic and a touch obvious.
I'd like to add a little insight, if I may.
Given that I've been an Advertising Creative/Art Director for many large ad agencies and clients for over 20 years, and am one of the few over 35 who understands the importance of consumer generated content and new media (and how it works), I feel Pogue's is a good article to share with hesitant clients.
While he writes about the fact that 'Web 2.0' is a good forum for more human, less structured, often funnycommunications that can introduce to people to previously unknown companies, (like his example of Willitblend.com), or give a humane and credible face to more corporate companies, he didn't mention it is as a part of a larger marketing plan.
I agree that allowing the public to create mash-ups and fun multimedia content will create trust, goodwill and positive attention. Of course clients get nervous about the potential downside of public forums and blogs. The fear of negative or potentially slanderous comments often keeps them from embracing avenues like You Tube, My Space and Facebook, but, as he pointed out in his own example, consumer generated content can easily be moderated nowadays.
If I may add a few things from personal experience, I've noticed how many large ad agencies do realize the importance of "Web 2.0" or advertising on new media, but don't go about incorporating it properly. Several are quickly trying to staff up their 'interactive departments' and scrambling to hire 'Interactive' Creative Directors. While this is admirable and necessary, they limit themselves to looking at those who have designed many 'hot' websites or won a bunch of Webbys, without realizing that understanding media and marketing credible messages to consumers isn't a new idea, it's just changed forums.
Sure, it requires manpower, technological resources and the spending of money, but that's always been advertising/PR. Yes, one must hire someone who knows the terminology, the intimidating acronymns, the glut of web apps and the functionality of the wireless world, but it's still marketing and it still requires well designed and easily comprehensible and navigatable, targeted communication to make a real and long term impact. Since most clients, and still many consumers, are not completely web savvy, just having a cool site or fun podcasts, favorable comments on social networks, hot videos on You Tube and a Facebook or My Space page is not enough, but it IS essential and should be included in any media plan nowadays.
The very same ad agencies who used to call me in for freelance to work on tv and print ad campaigns or new business pitches are now turning to young hot web designers for their interactive communications without realizing that, although talented at designing flash sites, online animation and cool or funny videos, they often lack an understanding of the big picture of marketing or are too myopic in their understanding of a comprehensive marketing plan. That 'talked about' video on You Tube may get their website a lot of hits and make a company instantly popular, but it must be considered in conjunction with other communications to build a brand that isn't just a flash in the pan. After all, no one is more fickle than a consumer and with the immediacy of online communications, a brand can be hot one week only to 'cool off' in a month.
To wit, many of the large ad agencies are losing work to the new crop of places that call themselves 'interactive' agencies or 'new media' agencies. Microsites for popular and prestigious clients like BMW aren't being designed by the ad agency of record, but instead are being 'farmed out' to these boutique companies filled with talented tech savvy 20 somethings.
While embracing Web 2.0 (or new media) as part of their marketing or PR plan may give a company a more humane, likable and credible image- especially to a younger demographic, the rest of that company's communications to the public, be it via 'old school' forums like magazine, newspaper and television advertising, must also be considered in conjunction with Web 2.0 to fully make a lasting impact.
It behooves any advertising agency to understand the importance of consumer generated content within these new forums as an essential PART of their overall communications for their clients. They need to start by educating their present creatives and clients at to how it works (and it does work) or else they will lose more and more future business to those companies who do embrace Web 2.0 (as defined by David Pogue).
And they can start by reading his article.