Much like the rapid growth of radio, then TV in the 20th century, social media is now experiencing explosive growth across the internet. We as a species have yet to realize the enormous potential of a fully connected real time network of global human consciousness and electronic data. Social design requires a very open framework between contributing parties, therefore tools that are open source are likely to receive the most benefit from a heavily connected network perspective, and the corresponding gigantic problem solving ability. Leveraging that creative potential into focused pieces of work has proven to be incredibly challenging in some areas, and quite natural in others.
The working definition for social media from wikipedia in respect to the post "Social media is information content created by people using highly accessible and scalable publishing technologies that is intended to facilitate communications, influence and interaction with peers and with public audiences"
http://www.youtube.com/watch?v=PHmwZ96_Gos
http://www.youtube.com/watch?v=6ILQrUrEWe8
(the above videos can be found Did you know 3.0 and Did you know 4.0)
Now consider some of the breakthrough recent design developments. In the gaming industry the ceiling of entertainment was literally torn off by Massive Multiplayer Online gaming (Ultima Online, Everquest, World of Warcraft) or for smaller network games (Counterstrike, Halo, Call of Duty). The value of these types of software was enormously increased by the ability to connect to other people with similar interests and share in the experience.
How about online video? YouTube video sharing is with little doubt one of the most potent video platforms second only to Google in web page link following. The power of YouTube is more than just free hosting. It connects people to content they are interested in, personalizing the message to what the viewer is seeking.
Social networking via blogging, myspace, facebook, twitter, friendfeed, linkedin all have social media incorporated to their powerful connection tools. The value of any social network only increases with size. Power in numbers.
Still think social media is a fad? Well you may be right according to Matt Dickman's article, When everything becomes social, what is "social media". His vision is one where social media is ubiquitous throughout all products, precisely why it will be the dominant design tool/focus.