Much of what passes as assessment on the Internet is no more than a multiple choice quiz. While this has its place (see quizzes and games links) Web 2.0 clearly affords the potential of a more complex, formative style of assessment. Many of the tools have the potential for simple assessment built in with students able to rate work or perhaps leave comments but there are issues with security etc. The tools below are the most promising I have come across in the field of formative assessment, while not perhaps the finished article they illustrate some of the potential of Web 2.0 in this area.
1. Annotate - This simple tool allows you to collect feedback on a document you have posted. It is simple to use and worked really well when I tried it. Perhaps students could post a piece of work for peer assessment before submitting a final redrafted piece for teacher assessment. Teachers could perhaps post exemplar material for students to analyse for a marking exercise.
2. Backboard - This tool is one of my favourites. While products such as annotate allow you to gather feedback on website pages by converting them to PDF this tool allows the orignal page to stay live. This means you can see the site as it is intended and check any links etc. and collect comments in a box beneath the actual page. Backboard works with Files or webpages and is definitely worth a look.

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RCampus - iRubric tool - This site will particularly appeal if you use rubrics or marking grids in your assessments. You can either browse through a selection of shared rubrics or make your own. What makes iRubric different than other such rubric makers is the rubric can be either printed or made interactive. Interactive rubrics can be used as stand alone tools or attached to a task that you have created. Irubric is a great idea but I did find it a little complicated to use. iRubric is part of a suite of tools known as RCampus and if you were looking for a free online learning environment and were willing to invest the time then these tools are well worth a look. Student gradebooks can be created and marks from the rubrics can automatically be added. iRubrics can also be used in a collaborative fashion. I have embedded one such rubric below to give you an idea of what the tool can do.
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Yacapaca - This tool was recommended by one of our members and is another one stop solution to creating an online learing environment. You begin by creating class lists and then assigning tasks to students. You can either use existing tasks or create your own. Students can make and take surveys, quizzes, tests and create websites and documents which can then be kept in an e-portfolio. Marks can be simly analysed and feedback given. Personally, I prefer a tool that I can dip in and out of as ICT is only one element of my teaching. However, if the majority of your time is spent online this is another one of those tools that is worth considering.
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Revizr - Similar concept to annotate. Students can post their docs and allow other users to comment upon them. There is a free version but limited to a 25 mb file size which doesn't seem too generous. This is a screen shot below.

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Co-Ment - This is another tool which allows users to comment on a text. The text is highlighted and the comments are listed beside the text. You can view all the comments at once or filter them. You can filter comments by user which could be useful in a class situation where several pupils commment on the document. In the example below, go to the view, simple filter and type in the name of one of the contributors such as 'rita'. Seems to work well. Yiou can also improve the uploaded text online and print the final version which is an advantage over other such tools.