Tagging is enabled on most content types within pages. Tags allow users to create multiple different lists for a single type of content. For example, if you had multiple groups of people you wanted to display (e.g. "current members" and "past members"), you could tag each person with one of the two tags and then limit the "current members" list to only display people with that tag.
Tags should only be used if you need them for limiting list results.
Tags are shared across all sites in pages, so superfluous tagging is bad for everyone. Best practice: create the list that you want limited before you start tagging individual content.
When content is tagged, the tags are displayed as links at the bottom of the content. This page, for example, is tagged with "How-to" and "Expert." These links go to pages that display a list of all content tagged with that term. The pages are automatically generated by the system, so individual users cannot edit them.