GPL's idea is, basically, 'if you give someone a program, you have to provide them with sources.' This fails for web applications, as no one is really giving anyone any programs (in a hosted solution); thus, anybody can take a GPL-ed web application, modify it, and host it without providing the source modifications to the users. [Source.]
This issue was addressed with the Affero General Public License, which extended the GNU General Public License 2 with section 2(d), which reads as follows: "If the Program as you received it is intended to interact with users through a computer network and if, in the version you received, any user interacting with the Program was given the opportunity to request transmission to that user of the Program's complete source code, you must not remove that facility from your modified version of the Program or work based on the Program, and must offer an equivalent opportunity for all users interacting with your Program through a computer network to request immediate transmission by HTTP of the complete source code of your modified version or other derivative work." This is the license for CiviCRM 1.
After the Free Software Foundation published GNU GPL 3, the Affero was adopted by FSF, and a combined license as published for network-operated software - the GNU Affero General Public License 3. This license extends the GNU GPL 3 in a smiliar way that AGPL extended GPL 2, but is actually GPL-compatible. This is the license for CiviCRM 2; you can read more about it on its Wikipedia page.
What is the different between GNU Affero General Public License (AGPL) and GNU General Public License (GPL)?