From Diablo Wiki
"Loot 2.0" refers to a major revision of the items and drop system in Diablo 3. The term originated inside the Diablo 3 development team and spread to use in the community.
The itemization redesign was long-promised in a free patch prior to Reaper of Souls, and the developers lived up to their word when the new system went live in Patch 2.0.1 in February 2014, after several months of testing on the PTR.
 Loot 2.0 Features
The term "Loot 2.0" is used fairly broadly, to refer to a suite of changes, improvements, and rebalances to the entire items system in Diablo 3. These changes affect items and what players do to obtain gear in the first place, and there were numerous changes during development
- Smart drops where a dropped item is guaranteed to roll the appropriate mainstat for the class that finds it.
- Fewer but better item drops, where players will see far fewer items, but the items (especially the rares) will have better stats.
- Higher stat rolls on items, and much better chances for mainstat and vitality on the same item.
- Affixes sorted into Primary and Secondary, with a limit of 4 Primary affixes per item.
- Legendary and Set Items with better stats and many new legendary properties.
- Reduced low end range of item values on legendary items.
- Buffed Legendary drop rates.
- Guaranteed legendary drops for a characters' first kill on each Act Boss. (Below lvl 60.)
- A guaranteed legendary drop from Diablo after Reset Quests and a full play through.
- Bind on Account for all legendary items.
- Reworked, much cheaper, gem upgrading recipes.
During development Nephalem Rifts (then called Loot Runs were planned as part of Loot 2.0 on Diablo 3, but that feature was ultimately expanded and incorporated into Adventure Mode, which is only available in Reaper of Souls.
 Reaper of Souls Loot 2.0
The itemization system in Reaper of Souls is also considered Loot 2.0, though it contains numerous features not found in Diablo 3. These include:
- Many more legendary and set items.
- Many additional crafting plans, including legendary and set recipes.
- Five higher levels of gems.
- Larger stat rolls scaling up to level 70.
- The Mystic and enchanting.
- Gambling via Blood Shards.
 Diablo 3 Console Loot 2.0
The Diablo 3 console was released in mid-2013 with an itemization system that was greatly upgraded and (in the opinion of most fans) improved from the PC version. The console's itemization system (the PS3 and Xbox360 versions are essentially identical) was often referred to as Loot 2.0, but it differs considerably from the Loot 2.0 that came to the PC in 2014.
It's more accurate to think of the console as "Loot 1.5," a modified version of Loot 2.0 that was made much more generous than Diablo 3 vanilla in drop rates and item quality, to compensate for the lack of an Auction House and the fact that many console players were going to play solo.
The console itemization includes much higher drop rates for legendary items, easier gem upgrading recipes, boosted stat rolls and generally much better gear. However it does not include Loot 2.0 features such as new and improved crafting recipes, special legendary item properties, and many other D3v2 Loot 2.0 improvements.
 Reaper of Souls Console
Though the Diablo 3 console will not be further updated with Loot 2.0 content, the full Reaper of Souls Loot 2.0 suite of features will be included in the RoS version of the console, due for release later in 2014.
 Loot 2.0 During Development
Josh Mosqueira explained how the development team uses the term in an interview with Diablo.IncGamers in July 2013.
...I think it’s just the reaffirmation of our evolved philosophy behind items. The way our items ideas evolved from launch until now, for the team to have a simple rallying cry around it. At the heart of it is the fact that Loot is a fundamental part of the game. Every time you’re clicking the mouse, you’re killing something because you want something awesome to drop. And we just really want to be sure that we’re keeping in mind that core fantasy. And that when items drop, players feel that there’s a utility to them and an intrinsic gameplay value to them.So I guess Loot 2.0 is a simpler way for us to say that we want to keep evolving the itemization philosophy and making sure that it’s focused on players and that players feel they’re getting cool stuff.
Community Manager Vaneras commented on the general philosophy in August 2013.
As in the previous Diablo games, gear upgrades will become less frequent over time as your character progress and acquires better and better gear. At some point around the time when your character is all maxed out and fully equipped with great legendaries, you will be more likely to find a good sidegrade than a good upgrade, but thanks to loot 2.0 as well as the Mystic, you will have some more interesting options to adjust and improve your gear.
 Diablo 3 Console Testing Loot 2.0?
The Diablo 3 Console was released in September 2013, and while it launched at v1.08, it had many tweaks and special modifications for the console. These included many changes to items and drop rates, especially the fewer-but-better rebalanced to Rare item drop rates/quality, and Legendary items that can drop all throughout the game, with their stats scaling up or down depending on the monster that drops them. While the overall Console experience is not Loot 2.0, some of the changes are features that will come to the PC version in Loot 2.0.
Prior to the console's release, Diablo.IncGamers.com asked the developers if the console was a test run for Loot 2.0 and received an informative answer:
So we had that advantage. We also did extensive testing on two fronts. We have what’s called our User Experience Group. Which is a sub-team within the QA department. They’re all expert players and they were playing the console for weeks specifically looking at this issue. To see if we’re running into any brick walls, if we’re dropping the right things.. they helped to identify a number of things that we had time to address and look at.
We also had our internal Strike Team, these are just other senior designers and devs across Blizzard and I think at the beginning they were really focused on the core initial experience, but the last copule of months their whole focus was on the end game and making sure that once players got to level 60 and beyond they had the right balance of items and such. In addition to that, I think there are a few mechanic things… making sure the recipes and item sales were beefed up for both the vendors and the blacksmiths. If you’re not finding it you’re going to be able to make it or buy it.
The last few months this was a big issue in testing for Jason Bender, and myself, and Matthew Berger. We wanted to make sure we didn’t run into the same problems. The philosophy is that players are going to get fewer items, so we have to make sure they’re the right items.
Flux: But you were probably curious about how it would work without an Auction House, right? Everything you just said about testing the economy in a close system vs. an open system.Josh Mosqueira: Yeah, for sure. We first started having those conversations from a technical standpoint, but we eventually saw the interesting by-product of it, was that it created a closed ecosystem so we could see how the economy would sort of evolve and mature without the influence of the Auction House.