Categories and Tags
Categories and Tags allow you to create a taxonomy to organize content on your blog.
Each post in WordPress is filed under a Category. Thoughtful categorization allows posts to be grouped with others of similar content and aids in the navigation of a site. Please note, the post category should not be confused with the link categories used to classify and manage links.
A Tag is a keyword which describes all or part of a Post. Think of it like a Category, but smaller in scope. A post may have several Tags, many of which relate to it only peripherally. Like Categories, Tags are usually linked to a page which shows all posts having the same tag.
Tags can also be displayed in “clouds” which show large numbers of Tags in various sizes. This allows for a kind of total perspective of blog content, allowing people to see the sort of things your blog is about most.
Many people confuse Tags and Categories, but the difference is easy: Categories generally don’t change often, while your Tags often change with every post. A good analogy is that Categories are like a book’s table of contents, whereas Tags are more like the index.
Both Categories and Tags can only be added to posts, not pages.
Adding Categories and Tags to Posts
You can add both Categories and Tags to your posts, as you are posting. On the post screen, look for the Categories and Tags boxes, just below the Publish box. Check the box next to the category you would like to include, or click “+Add New Category” to create a new category for your post. Beneath Categories are Tags. Type your Tags in the box, include commas between multiple Tags, and click “Add.”
In the example above, the post is on elections in Zimbabwe, and is included in the “Case Studies” Category, as well as a newly created “Africa” Category. The Tags are more specific: Zimbabwe and elections.
Displaying Categories and Tags in your Blog’s Sidebar
You will need a widget to display categories and tags in your sidebar. The Categories widget displays a list or dropdown menu of all categories, and the Tag Cloud widget displays a visual representation of all site tags, in which frequency of each tag’s use is represented by the size of the text.
Category and Tag descriptions adapted from here: http://codex.wordpress.org/Glossary