Tags are one of the transaction properties that you can create, modify and delete. Tags need to be enabled via transaction layout settings before they can be used. Each transaction can have more than one tag assigned.
Tags become useful when you are tracking transactions related to a single project: a wedding, a trip or something like home-improvement. For example, you might eat at McDonald's while at home (transaction has McDonald's payee and Eating out category) but also during your trip to Paris. In the first case, you'll most likely not assign any tag but for the second case, you might want to assign some tag like "Trip to Paris" to bring all trip-related expenses together - allowing you to generate a report at the end of the trip, reviewing how much you've spent overall.