A tag, according to SEO consultant, is “a (relevant) keyword or term associated with or assigned to a piece of information, thus describing the item and enabling keyword-based classification of information.
With tagging, items are categorized by keyword. These keywords can then be displayed as navigation using a “tag cloud.” In the tag cloud, the font size of each keyword is determine by the number of times that keyword has been used as a tag. The more items has the tag, the larger the font size. Tagging is a powerful tool for search engine optimization (SEO). Because those “tag cloud” are keyword-rich, it is very good for SEO.
At wordpress you can use the the function wp_tag_cloud to bring in your “tag cloud”.
For default usage use:
For more information see:
http://codex.wordpress.org/Template_Tags/wp_tag_cloud