Tags and categories are a great way to organize your blog content. Categories allow you to group posts together like dishes in a menu; while tags are more specific, like ingredients of a dish. I’m often asked if one should use both. The answer, of course depends on your needs. The Bluelime Media blog at the time of writing has 254 posts, 11 categories and 51 tags. I’ve tried to keep things organized and keep having to tweak things, but I think this number is appropriate for me. A much larger blog, like TechCrunch, which publishes multiple times a day, would need many more tags and categories.
Contrary to what some people may tell you, your tags and categories are for your users and NOT Search Engines. Adding as many tags to your blog posts as possible will not improve your search engine ranking, so please be kind to your users and keep them in mind.
WordPress makes it very easy to add tags and categories. The following video by Micheal Pick walks you through the process.