Tags are short phrases or words used to organize your journal entries. When making an entry, you can specify one or more keywords ["tags"] for the entry. Then, presuming you are using the S2 style system, you can sort and view entries using a particular tag.
Adding tags is possible while writing the entry or when editing one. When adding tags this way, you will need to type the tag by hand and separate multiple tags using a comma, such as "animals, dog". After the entry has been posted, you can also click on the icon labeled "TAG" which will lead you to the Edit Tags page [http://www.insanejournal.com/manage/tags.bml].
Assuming you are using the S2 style system, the tags will appear when you view your journal, and will be links. The link for each tag leads to: