ASP.NET was first previewed at PDC in July of 2000. The first beta followed about a year later and the actual RTM of ASP.NET 1.0 came in February of 2002. ASP.NET 1.1 and Visual Studio 2003 came about a year after that, but did not include many feature updates.
ASP.NET 2.0 / Visual Studio 2005, collectively code-named 'Whidbey', have been in development since before ASP.NET 1.0 was officially released. This next version will not be as revolutionary a change as the update from ASP 3.0 to ASP.NET 1.0 was, since it builds on a common foundation provided by the Common Language Runtime and the .NET Framework. However, this new release really takes things to the next level in terms of developer productivity.
Although ASP.NET is leaps and bounds better than legacy (or, if you prefer, classic) ASP, there are still many common scenarios that require a lot of work and code to accomplish. Databinding, authentication and authorization, site templates, and pageable/sortable/editable data grids are all prime examples of things that are still too hard to do with ASP.NET 1.x. One of the goals of Whidbey is to reduce the amount of code developers will have to write by 2/3. Other goals include improving developer productivity, performance, easier configuration and hosting, and providing a single set of controls for all devices.