"Situational applications" are a way for people with domain expertise to create applications in a very short time without much IT involvement. These applications can be created just-in-time by empowered enterprise business users and by simply combining SOA enabled information sources and services or SOBAs [Service Oriented Business Application] on the Intranet and Internet.
Please see an detailed blog on this topic from a web 2.0 vendor.
Interesting podcast from IBM on this new enterprise 2.0 concept talks about how IBM preparing for this change of application development model.
For resource constrained enterprise IT, this decentralized software development paradigm can provide a better way to serve the enterprise user's need for more softwares.