I noticed today as I was trying to work out why I was unable to log in to my work blog, that this day two years ago was when I made my first blog entry. After one year I made an entry about what I thought of the blogging phenomenon after a year of trying to understand it. I'll give my thoughts after two years now.
I read fewer blogs these days than a year ago, although I am subscribed to many more - 56 at last count. This is still nowhere close to the hundreds that some people read. It's easy to subscribe and never check back, but my agg. keeps pulling them down. That said there are a few consumer blogs and personal blogs that I read regularly and expect to continue to do so. I also write fewer entries than a year ago. Certainly part of this is due to having less free time being a parent now. There are some "blogs" that I just prefer to read in a web browser. I think this was the same a year ago.
I produce atom and rss feeds for various personal web sites - hoops, baby page, and at least one of my family members has subscribed to the baby's feed. I have written code for my sites to consume feeds exposed by other sources. Hurray for RSS and XML.
The term "blogosphere" is very common. CNN has a television show of people reporting what other people write on their blogs. The Daily Show had a bit making fun of CNN's show. My non-technical mom knows what a blog is now. This is probably a result of me, but no doubt she's heard it from other places.
I am convinced that you can make money from blogging. Just look at Calacanis' and Denton's operations. At this point, I think consumer oriented weblogs are a legitimate media form definitely capable of producing ad revenue.
I still use a standalone desktop aggregator, although I have an account with a web based aggregator.
I expect the popularity of blogging and the use of such terms in media to lessen or just fade into the background in the next year or so. People will point to this proving blogging as a fad, but it will not go away. I expect it will be less distinct from regular web based "columns" than it is today. These days you see the blogs of staff writers on many sites, msnbc, news.com, nba.com, etc. The only difference between a blog and a column imo is trendiness.