When you create a post, you want to tag it somehow to help your followers find the post and other posts that are similar to it. Tags are very much like Categories, but are more specific.
For instance, if you write about a favorite movie, a tag could be the name of the movie, the names of the two main actors in that movie, the movie genre, etc.
You can create and manage an archive of tags by going to the Tags screen under the Post link.
Here you can create a New Tag to be stored in the archive, with a description of the tag for reference. Any time you create a post and tag it, that post will be connected to the tag archive.
Another way to tag a post is when you are actually creating the post. From the Post screen, you can tag it by typing a name in the Tags field or Choose from the most used tags to select one already stored in your Tags archive.