Tags, also called labels, are a kind of micro meta-data often associated with online user generated content. Basically, tags are keywords created by online users to describe the content of their sites, wikis, blogs, pictures, etc. 

These tags are especially beneficial to categorize, retrieve and search for information about a given topic on the social web.

Tagging is indeed a social and collaborative activity, which consists in classifying one's content with a specific tag, and at the same time making it easier for others to find that information on the web. It is a powerful way to make one's content more easily searchable and thus accessible.

Tagging is also closely linked with Social Bookmarking, and the act of sharing resources online.  

More information on tagging can be found here.