To me, Library 2.0 means that a library has an interactive, online presence in which its users can participate. More specifically, I tend to associate Library 2.0 with the library community's ability to create content and feedback in the library's online world.
I think this concept has a lot of potential for any type of library. Because libraries are essentially service-oriented, it seems only natural that they should take up a technology that can connect them more closely to their patrons. Library 2.0 technologies can provide ways to interact with members of the community who may not otherwise be participants. It can give the library valuable feedback on its programs, collections, and services. It can make the library more aware of its patrons wants and needs. And it can be a powerful, low-cost marketing tool--always a plus for our generally under-funded institutions.
Successful libraries are aware and responsive to the needs of their communities. In order to stay relevant, they must remain aware and responsive. When used competently, Library 2.0 technologies can create a constant, up-to-date dialog between organization and community, keeping the library informed so it can give users what they need. A responsive, relevant library is more likely to be widely used, well-thought-of, and better funded. :)
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