Probably a boring and cliche topic for many, but this has always bothered me throughout life.
When I was a child I believed in the idea implicitly, possibly because it was a good excuse to explain away my many failings. As I grew older I started to realise that while there are clearly different skill sets between people, sometimes defined by differences in genetics, at the same time application was always important as well.
I suppose it was foolish for me to start the topic as I cannot think of many insights into the subject. But I do think the answer lies somewhere between talent and application.
It's probably true that my motivation here is a lack of satisfaction with my own application. For me failure and success are measured on a personal basis and I try to keep it separate from the mainstream understanding of those notions. If only because I do not meet up with those mainstream assumptions ie: wealth, power, desirability, winning.
But then again this could just be the understanding of one individual who is just intelligent enough to understand his envy of something like talent, but not enough to understand the idea itself.