Tags are keywords that you can attach to documents. Tags should be the most likely words that a person would type to find a document. For e.g. Lets you have scanned Invoice received from Acme corp for the month of January. To tag this document you should use words like invoice, AcmeCorp.

You can use tags to categorize documents and make them easier to find. You can also use folders to group/categorize documents but a document can only be part of one folder. Sometimes a document can have multiple categories and this is where tags come in handy because multiple tags can be attached to the same document.
 
A combination of folders and tags is a powerful way of managing your documents.

You can attach as many tags as you like. Just use a semicolon to separate them.  Each tag must be a single word and cannot contain a space.

Its not mandatory to attach tags. Tagging is the quickest and the easiest way of indexing your documents.