Categories and tags are tools you can use to organize your content. Each method has its benefits. Using them together is very powerful. Yet each one is inteded for a different use and it is important to use them efectively in the right context. E.g. tags being public and categories being local.
What is a Category?
Categories can be created in any forum or other place in the community to help organize content into broad topics. They are intended to help filter content within a place. Categories are unique to the place in which you've created them - even if the same categories exist in another place, they cannot be linked together.
Only community admins can create categories. They are managed. There can be only up to 30 categories in a place. This limit is implemented to increase clarity and to make categories used only for broad meaningful topics within a specific forum.
Categories always appear in the content page in a forum and allow for immediate filtering of content in that place.
What is a Tag?
Tags are another way of organizing content, but unlike categories, tags are visible across the entire community.
Tags are less structured and more informal than categories. Anyone that writes a question or starts a discussion can apply tags to it. You can apply as many tags as you want but keep them distinctive and meaningful. They are great tools for topic search and discovery across different forums.They play a critical role in making content more discoverable and they also factor into search results and recommendations. Think of them as keywords or labels that you would like other people across the entire community and also across public search engines to easily look for and find.
All content authors can create and apply tags. If you tag a piece of content in forum A with the tag "success stories", and someone else goes to tag a piece of content in forum B with "success stories", as they start to type the tag they'll see your tag, and other similar tags, already listed.
See tips for using tags: Tags - Simple but powerful. How to use them?