I posted this earlier as a comment but it was a bit buried there so here it is reprised.
There’s a more ecomomics focussed (but excellent) article on ‘peer production’ at Bubblegeneration.
2.0 technologies allow production to be atomized – to be subdivided into arbitrarily fine microchunks of value activities. Prosumers can self-select and manage their own interactions with these microchunks, rather than incurring the real-world coordination costs of managers, meetings, and red tape.
Because these microchunks of prosumer-contributed information can then be recombined and reused, the community realizes a second network effect: the total value of the network of microchunks is greater than the additive value of each individual microchunks.
All this implies that peer production is an extremely powerful and hyperefficient way to organize the production of goods and service that meet certain criteria. Recently, investment in peer production models has hit an inflection point: Kleiner Perkins’ recent investment in Zazzle is a bet on peer production, as are the new breed of social search startups, such as JetEye, Squidoo, and del.icio.us, as are vertical communities, such as Last.fm, Flickr, and Basenotes.
I’d also strongly recommend downloading the Powerpoint titled The Atomizing Hand – The Strategy and Economics of Peer Production, that is linked to the article by Umair Haque from Bubblegeneration.