Web 2.0 applications just keep getting better, gaining the features people expect from traditional desktop applications.

Even though the business models to support online applications are still fuzzy, tech start-ups and established software vendors plowed ahead in 2007, creating an explosion of online digital media and social-networking sites and features.

While the big story in 2006 was Google's acquisitions, rival Yahoo this year netted, for about $350 million, one of the prized Web 2.0 companies--Zimbra, which makes an Ajax-heavy Web e-mail and calendar application.

The incumbent desktop software vendors, notably Microsoft and Adobe Systems, also committed to software services in a substantial way.

In February, Adobe's then-CEO Bruce Chizen told CNET News.com that the company was working on an online version of Photoshop, news that set the blogosphere buzzing.

Photoshop Express, as it's called, won't be the only Web-based digital image editor. But it shows how much the Web has shaken up the software business, when even a classic desktop application can be reversioned to go online.

Microsoft, meanwhile, took steps to finally create Web services around its dominant Office desktop suite. Called Office Live Workspace, the offering lets people share Office documents online.

Having already signed on millions of consumers to Gmail and its other Web applications, Google launched a subscription service, Google Apps Premier Edition, aimed specifically at business users and part of a broader trend of making enterprise applications more user-friendly by adding Web 2.0 features.

Adobe, too, got into the "Web Office" games when it acquired a start-up that has developed Buzzword, one of several Flash-based online productivity applications.

The Web 2.0 plumbers were busy at work during 2007 as well, making enhancements to the development platforms to make online applications richer.

Google introduced Google Gears, a browser plug-in that lets Web applications run offline.

Microsoft released Silverlight, its long-awaited rival to Adobe's Flash, and said Silverlight would run on different platforms and with multiple programming languages.

Microsoft also started to release details of its "cloud computing" initiative, which will give developers access to a range of hosted services for building Web applications.

One of the most exciting new platforms for developers is Adobe's Integrated Runtime, or AIR, which lets people use Web tools to write programs that behave like traditional desktop applications.

And while providing application programming interfaces (APIs) with Web applications has been going on for years, the social networks got onboard in a big way this year.

Facebook, which opened up its network beyond college campuses, announced in May that it is letting outside developers create widgets, or mini-applications, that run on Facebook. LinkedIn released its own developer program in December.

For its part, Google introduced OpenSocial, a set of APIs meant to bridge different social-networking sites.