Lorelle has a great article on Tagging and Tags, what they mean and what they do for you the blogger. There is also a great list of resources in the article.
1. A Tag is a Keyword in a Link
A tag is a keyword. It is created by adding the attribute rel=”tag” in any link going any where.
<a href=”http://lorelle.wordpress.com/” title=”Lorelle on WordPress” rel=”tag”>Lorelle on WordPress</a>
This creates a “tag” for “Lorelle on WordPress”. The tag is the words which the link wraps around. Without it, it’s just a link. No more, no less.
With it, it is recognized by search engines and tag services crawlers which add that word or phrase to their “tag database”, acting like a keyword. When a visitor types in the tag word or phrase in a search engine or tag service, like Technorati, any post with that “tag” or those keywords, even if not tags, will turn up in the results.
Check it out at Lorelle on WordPress. I could not have written the article better myself. Very comprehensive and easy to follow.