The Kilo-Degree Survey (KiDS) is an optical wide-field imaging survey carried out with the VLT Survey Telescope and the OmegaCAM camera. KiDS will image 1500 square degrees in four filters (ugri), and together with its near-infrared counterpart VIKING will produce deep photometry in nine bands. Designed for weak lensing shape and photometric redshift measurements, the core science driver of the survey is mapping the large-scale matter distribution in the Universe back to a redshift of ~0.5. Secondary science cases are manifold, covering topics such as galaxy evolution, Milky Way structure, and the detection of high-redshift clusters and quasars. KiDS is an ESO Public Survey and dedicated to serving the astronomical community with high-quality data products derived from the survey data, as well as with calibration data. Public data releases will be made on a yearly basis, the first two of which are presented here. For a total of 148 survey tiles (~160 sq.deg.) astrometrically and photometrically calibrated, coadded ugri images have been released, accompanied by weight maps, masks, source lists, and a multi-band source catalog. A dedicated pipeline and data management system based on the Astro-WISE software system, combined with newly developed masking and source classification software, is used for the data production of the data products described here. The achieved data quality and early science projects based on the data products in the first two data releases are reviewed in order to validate the survey data. Early scientific results include the detection of nine high-z QSOs, fifteen candidate strong gravitational lenses, high-quality photometric redshifts and galaxy structural parameters for hundreds of thousands of galaxies. (Abridged) ; Comment: 26 pages, 26 figures, 2 appendices; two new figures, several textual clarifications, updated references; accepted for publication in A&A