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Tags are different from wordpress categories. They are clickable, comma-seperated keywords that help you microcategorize a post by defining the topics in it.
Tags do not have a hierarchy. There are no parent tags and child tags. If you write a post about your blog and you can put that post in the category called free theme. You can also add tags that are more specific such as to red, blue, two columns, and etc. If one clicks on the red tag, he will find all posts that contain the red tag.
Tags are useful in term of seo. Search engine spiders harvest tags when they crawl your blog. Tags helps other people find your blog when they search for specific words.
You can manage your tags in the wordpress administration panel by clicking on the Post Tags link on Posts menu. On the Tags page, you can view, edit, deleted and add new tags.
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