Just starting learning German and a number of texts I've read say that 'zwei' takes on a morphological change to 'zwo' in spoken speech to differentiate with 'drei'. How often do people actually use this alternative in everyday speech, or is this one of those textbook 'Good to know!' asides that actually only live within the confines of textbook pages?
Above all, it's good to know. Speaking for Austria, it's not very common in spoken language (any more -- used to be much more frequent), unless you are on the telephone, say, and want to make extra certain that no mistakes are made. It's routinely used in radio communications, too, much like the English "niner".
Personally I use it for important things like a phone number, bank account or credit card number, things like that. It's definitely used, but not as common as you might think.
From my understanding, "zwo" is a replacement for the correct "zwei" that has emerged and became relatively widespread when telephones and radio communication were introduced because with bad signal quality affecting especially consonants, "zwei" might easily be confused with "drei".
I would suppose that part of it becoming widespread was through the military. Also it became common in business communication (offices) because of the growing importance of communication via telephone.
However, it never made it into everyday and standard language. (In everyday language perhaps by way of contamination from military and office use.) You would never write "zwo", or if you did, readers would ask themselves what's wrong with you.
There might be regions in Germany where "zwo" is part of an oral regiolect. I would intuitively locate this somewhere in the Middle-North-West of today's Germany, but I may be wrong about this. I would not see it related to the Bavarian "zwoa", because the change of vocals from "zwei" to "zwoa" is systematic in Bavarian, see Eichhörnchen --> "Oachkatzl", meinst du --> "moanst", du weißt --> "woast". I think where people in Bavaria say "zwo" they took this from the telecommunications habits described above. But actually I have never heard a Bavarian say "zwo", and quite logically so, because due to their anyway existing "zwoa" they have no need of using an artificial word to differentiate zwei from drei.
I first ran into this when, as serving with the US Army in Germany in 1995. I listened to a Polizei transmit a number 27262 as zwo, sieben, zwo, sechs, zwo. In my broken German, I asked him why zwo and not zwei and he explained they used zwo for all radio communications to clearly differentiate from drei and then went on to point out that we NATO use FIFE instead of five and NINER instead of nine.
That's dependent of the Region.
As you may know in German there are more Dialects than in English.
In the southern 'states' (e.g. Bavaria)
zwoa or even
zwaa more in Austria) are used pretty often (sometimes people use only
zwoa). In the northern parts of Germany most people use