Think of a tag as a label (metadata). Tags are usually personal and informal, in other words, you are assigning whatever labels you want to assign. It's completely up to you. However picking a tag or a label that you think others would also use makes the tag more powerful.

You can tag many things, but most commonly tags are used for pictures, videos, blog posts, and social bookmarks. But with new online office applications like ThinkFree (which is like Microsoft Office: word processing, number crunching, and presentations) you can even tag the documents you create online.

When these files or posts appear online, users can search for them based on their tags. Tag clouds show users which tags are used more frequently by presenting them in a larger size based on frequency of use.

Wikipedia Link: Tag
Related Wikipedia Links:

• Collaborative_tagging
• Tag editor
• Folksonomy
• GeoTagging
• Machine tag
• Metadata
• Ontology
• Social bookmarking
• Social networking
• Tag cloud
• Web 2.0
• Resource Description Framework (RDF)

Dictionary.com Link: Tag