Tagging is a WordPress feature which people tend to either embrace wholeheartedly or ignore altogether. It's different from using categories not just because of the lack of hierarchy but because tags don't tend to be used in a site's structure or navigation in the same way as categories.
Tags are a way of categorizing your posts but they are not hierarchical like categories. Most sites tend to have a small, defined number of categories which dictate the site's structure, plus a larger (and ever growing) number of tags which are used to make content easier for users to find but not to structure the site.
When to Use Tags
For people new to tags, I'd recommend using them in the following cases:
> Your site is large and complex (for example a multi-author blog, a news site or a vacancies site) and users will need to be able to get at content quickly and efficiently.
>Tags add an extra layer of usefulness on top of your categories - for example on a jobs site, categories might include the industry or contract type, whereas tags could include things such as pension, car or other bonuses that come with the job
> You have SEO keywords that you want to make best use of by using tags. A word of warning however: since the Penguin changes to Google, using tags for keyword-stuffing may actually lose you ranking. So be careful not to use too many tags for each post and think about your slugs so they don't repeat the same keyword again and again. For example a url such as http://best-camera-site.com/tag/3D-cameras may look as if you are keyword-stuffing - you're better off using http://best-camera-site.com/tag/3D.
If the default tagging doesn't quite meet your needs, you might want to use a custom taxonomy instead. Taxonomies can be registered as hierarchical (like categories) and non-hierarchical (like tags); in fact, categories and tags are each a kind of taxonomy themselves.
Displaying Tags to Users
WordPress will generate an archive page (or pages) for each tag you create, which users can access to view all posts with that tag. The most popular way to provide access to tags is via a tag cloud - a widget for a tag cloud comes with WordPress so it's easy to set up.
You can also add a list of tags at the end of each post - by listing the tags applied to that post, you provide a link to the archive page for each tag. Most well-built WordPress themes, including the default theme, include this functionality.
A word of warning though - I would strongly advise only showing excerpts on your tag archive pages, indeed on all of your archive pages. This will make it easier for users to skim the posts with that tag and select the ones they want to read and will also have SEO benefits. If you include the full text of your posts in your tag (and other) archives, Google could well mark you down for duplicating content across your site.
Rachel McCollin is a web designer and developer, specialising in WordPress development and responsive design. She runs Compass Design, a web agency based in Birmingham, UK, and is the author of WordPress: Pushing the Limits, a comprehensive guide for WordPress developers.