Ever wondered what all the “Web 2.0″ fuss is all about? Sure, it’s often described as the second generation of online services and applications designed to keep people social; but what does that actually mean for the average user? For an answer that leaves little doubt about the usefulness and inevitable need for powerful, interlinked web applications, check out Picnik.

Picnik – possibly the epitome of Web 2.0 – is the ultimate showcase when it comes to demonstrating that online applications can be just as fast and smooth as any local application. Picnik is a sophisticated, yet simple, photo-editing application, which has all the necessary features to easily outperform and outclass Vista’s Photo Gallery and Apple’s iPhoto.

Although there is no way that Picnik is going to convert anyone away from professional powerhouses such as Photoshop, it has enough elegance and grace to become a social networker’s best friend. Picnik is lightning fast thanks to the clever implementation of AJAX and Flash. Once you hit the “Fullscreen” button, there is no way to tell that Picnik is all the way up in the clouds, as they say.

After a quick and painless registration process, users are presented with a very simple tabbed interface that easily guides users through the process of uploading, manipulating, and sharing their creations. One of the things that makes Picnik such a powerful “Web 2.0″ applications is that fact it is set up to seamlessly integrate with a most popular image sharing sites out there, including: Flickr, Picasa Web Albums, Facebook and Photobucket.

Uploading images is a piece of cake. Once a user hits the “Connect” button and enters their login credentials, it’s a synch to import images from any of the above mentioned networking sites. And if you’re not into the whole “Web 2.0″ phenomena, then there’s plenty of other options at your disposal: either upload your images directly from a local directory, enter a URL, or snap a quick picture with your webcam. You can even search for images from within Picnik, using the Yahoo Search tools.

Once you’ve got they image you want into Picnik, you’ll be able to do all sorts of things to it; some good, some not so much. Obviously, all of the standard manipulation tools are present: Auto-fix, rotate, crop, resize, exposure and color correction, sharpen, and, of course, red-eye correction. But, if you really want to create something unique, then there’s a whole other tab waiting for you.

Under the “Create” tab, you’ll be able to apply a wide variety of “Effects.” If you’ve ever used Photoshop or any other photo editing package, then you should be pretty familiar with the range of filters that exist. Some are useful, while others are a complete joke. Besides just apply one (or more) of the 24 filters available, you’ll also be able to ruin, erh, enhance your images with text and shapes. To be fair, though, the power of each of these tools is pretty amazing; you’ll not only be able to choose the font and size you want, but also how align the text, what color to make it, and whether you’d like it to appear faded. Once you’ve added all the necessary shapes and text, you might want to add one of five different borders.

Another incredibly useful feature is the Undo & Redo system. Any change you make to the image can be easily undone, and if need by, redone. The part that surprised me about the feature was that it’s not just limited to undoing one or two changes, like that sorry excuse for a photo editor called iPhoto. At one point, I was able to undo 12 changes I made to the image.

Once you’re all done editing, hit the last tab to save and share you photo with the world. At this point, Picnik doesn’t actually store images on the own service, but you can easily export your image back into Flickr, Picasa Web Albums, Facebook, or Photobucket gallaries. And if that isn’t the way that you wann go, then you can always save it locally, e-mail it, or send it off to an insane number of other sites, like: ImageShack, Freewebs, Walmart Photos, TypePad, Costo Photo, Snapfish, Tumblr, and SmugMug, to name only a few.

Overall, Picnik deserves to do well; it’s a good concept, that’s been executed really well. This is Picnik’s first week out of beta, and to celebrate the accomplishment, the developers have decided to grant everyone full access to all the features. So, go check it out while you can. At the end of the week, Picnik will cut off some of the more advanced features and make them part of their “Premium Feature Stream,” which will go for an easy $24.95 a year.