Wikis have most certainly become one of the most popular ways to collaborate and create a non static yet non blog website.
This has some good before and against points, which I'll drop here:
Easy to use
Simple syntax (don't need to know HTML)
Anyone can make changes -- no more waiting for the Webmaster to get around to your requested changes.
Many free and open source options
Flexible and extensible
Too open -- "I don't want someone changing my writing!"
Vandalism and spam
Having set up a wiki or 2, I'd have to say that battling with the wiki syntax after years of pure HTML is not easy (personally). It can be a steep learning curve, and this is probably why the freebie places offering full set up are popular.
FOr library use, the most obvious wiki use is a readers advisory that can be tailored to the actual collection. It's great to draw resources from general adivsories, but there's no point getting people all excited about a book there's no copies of in the collection.