This presentation by John Breslin of DERI and boards.ie is the best explanation of the social networking aspects of Web 2.0 as I have seen anywhere.
John builds the argument that connections between people are not just about the connections ("Hey, I have 100 LinkedIn connections") but they are about connections around objects. In this respect, Wired's already widely-criticised story on "The Six Lamest Social Networks" actually has it backwards: by organizing networks centrifugally around objects, Social Networking sites have meaning, even when they do not have 200 milllion users and even when they are centered around minority interests (like Thomas Kinkade paintings!). The point is that they are centered on objects which are in common.
Normally I gag on any presentation which includes the Semantic Web, usually preceeded by words like "ontology" (I agree with Sean McGrath's sentiments: "I'll cheer from the rooftops if anything great comes out of this gargantuan effort around the Semantic Web but gee, I'm just not at all convinced that this stuff is going anywhere fast."). But this one is different. The presentation builds to make the case that the way in which they objects are defined for Social Networks can use Semantic Web elements, such as the widely-cited "Friend of a Friend".
Anyway, this presentation is highly recommended. View it for yourself
2:50:21 PM 
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