Have you ever noticed that webpages based on the other side of the world are much slower than pages closer to you? I don't blame you if you haven't; the difference is on the order of tenths of a second. But if you think about it, that's pretty incredible. Foreign countries are far away, but on an electronic timescale, they may as well be next door. The world may not be flat yet, but its derivative is certainly decreasing pretty rapidly.
We probably won't ever eliminate distance completely. We may not need to, though. Studies have shown that any action that takes under a tenth of a second or so is perceived as instantaneous; whether it takes a nanosecond or a hundred milliseconds, we won't notice the difference. Eight orders of magnitude is an awfully big range to have just have disappear.
When technology scales this far beyond our ability to follow, it changes the rules of how the world works. Scale loses all meaning toward the low end; big blurs into small, long blurs into short, expensive blurs into cheap, which blurs into free. Not everybody is thrilled about this. As a rule, disruptive changes are bad for established players in markets, and they fight the changes as hard as they can.
Take ebooks, for example. I have an ebook reader, and it's a marvelous thing - I can carry around thousands of books on a device that's small enough to fit in my pocket, but large enough to read comfortably. You'd think that publishers would be all over this, right? Instead, though, they're sitting in a corner pouting, with their fingers in their ears, doing their best to pretend that ebooks don't exist. And maybe that's all they can do; the fact is, publishers exist primarily to publish books, and the marginal cost of printing an ebook is exactly $0.00. They've seen the writing on the wall, and they know that their entire industry was made irrelevant while they weren't paying attention, so all they can do now is ride it out while it lasts.
The fact is, it is now becoming increasingly economical to simply give things away for free. Open-source software is the shining example of this, of course. The idea that people from all over the world would spontaneously organize, make something interesting, and then give it away for free to anybody who wants it, is completely ridiculous. It could only happen in a world where communication is instantaneous, and marginal costs are zero. Software aside, imagine what we could achieve if everything ran like that?
But, the question still must be asked: Who is going to pay for this free-culture utopia? The internet isn't really free; its real-world manifestation requires constant babysitting to run smoothly. The question goes straight to the heart of the uneasy division between the digital world and the real world. (It might even be inaccurate to say "the digital world", for while information online obviously follows very different rules online than in the real world, it's also undeniably true that the digital world is a part of the real world as well.) Things in the digital world can interact with other things there, and things in the real world can interact with things here, but somehow the boundary still remains an awkward no-man's land.
There already exists one "digital divide", between the technological have's, and the have-not's. This is the other digital divide - the gap between us, as individuals, and the world we've created. We reach across the gap, and we can harness the convenient properties of the other side, but on a very fundamental level we don't really understand it.
Or, to summarize: The Internet is a weird place.