Understanding categories and tags can be confusing for many new users of WordPress. In this article we'll explain a little about each of these and give some pointers on how to best use each one to organize your WordPress site.
Categories in WordPress are groupings you create in order to organize similar posts together. Think of categories as chapters that form the Table of Contents for you blog posts. Keep in mind that categories only apply to posts and not pages. It's best to think about the various categories you may want for your posts before diving too deeply into creating posts. While you can go back and assign posts to a category even after publishing, it's much more efficient to do this when you're creating the posts.
You can add categories as needed at any time. You can even setup sub-categories of a category for more precise organization of posts. By default, most themes display the categories in the sidebar of your posts pages. If not, you can easily add these to your sidebar using a widget. As you build content the categories will be very handy for visitors who want to view posts by subject. You can create and manage your categories by selecting Posts > Categories in your WordPress dashboard
Note: It's important not to confuse Post Categories with Link Categories which are simply ways to organize your links (blogroll) to other sites or blogs. Usually when referring to post categories they are simply called categories. Categories for links are referred to as link categories to differentiate between the two. We'll go over Link Categories later in this article.
Think of Tags as index words for your posts. While tags can be thought of as similar to categories, they usually have a smaller focus. Multiple tags can be assigned to posts which is especially helpful to your visitors if they want to search your site for certain terms. You can also add a tag cloud through a widget to show the various tags assigned to your posts. Tags can be created either on the fly when creating posts or by choosing Posts > Post Tags in your WordPress dashboard menu:
Link Categories can be setup to organize your lists of links to other websites or blogs. These categories only apply to links and do not affect your post categories. To create and manage the categories for links select Links > Link Categories in your WordPress dashboard menu: