To me tags are dumb BUT this is how I played it when I played it:

Blogs are big-picture level distinctions. Could be based on a user_ID or a concept. Politics, Open Source Code, Photography.

Categories are more specific inside a higher level distinction, but still sort of sum up a post in one easy sentence. For example if a blog about open source apps I might say "this post is about drupal". Thus drupal would be a category. If I was comparing drupal to, for example, etomite I might cross post it into another category as well.

For tags I went with "stuff the post touches on but isn't really about". In the drupal to etomite comparison I might tag it with 'lost' because I got lost trying to decide which is better, or 'bob' because I link to my friend bob's etomite installation.

But to me since I can cross-categorize I don't really need tags. I mean, since I can have as many cats as I want and am only obligated to use one main cat, the only things tags allows me is the chance to make up a category on the fly. Unfortunately I then have to remember all the tags I've used so I don't tag this new post with "Foo" when I've actually used "foo!" on quite a few posts. That's why I bagged tagging: to me it is kinda sloppy.

I have an installation with multiple users all blogging into one blog. I tried to set up the cats so they could cross-categorize nicely, but maybe I should get tags on the simple form and leave them with only two main cats?

Yeah, I'm struggling with it myself..

Usage 1:
Categories can have sub-categories
We can post cross-categories
Leave tags alone

Usage 2:
Have 1~3 Categories only
Use Tags - as you've said "category-on-the-fly"

Usage 3:
Categories = for higher level distinction
Tags = for "stuff the post touches on but isn't really about"

Usage 4: (This one came from a friend via plurk.com)
[url=http://www.plurk.com/mikeabundo]Mike[/url]: In many magazine-style WordPress themes, categories determine *layout*, not topic.
Mike: Bloggers who use magazine themes use categories for structure and tags for search.

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Anyone else who can share their ideas?

PS
I think we need a way to see all the tags used, like the way Blogspot does it. There's a plugin in existence, however, it's a "suggestion" plugin, not really a way to see all tags used (again aggregate-base :p hehe).

The reason why the plugin only suggests tags is because at least one person I know has 55,000+ tags, that'd be a bloody long list ;)

Having said that, I have considered adding a "show all" option to the plugin, just haven't got that far yet ;)

¥

When I do a post I will include it in up to 3 categories, mostly 2.

Im with Laicombs usage 4: Categories for structure, Tags for search (and search engine stuff...which I believe they help). In saying that I dont use tags on all of my blogs. They add work and can look messy.

I agree with EdB. I tend to stick with categories and don't care for tags.

Most of my blogging has been small scale and focused, though, so its pretty easy to keep things organized into just a few categories.

I see tags being useful on a larger blog that hits on many different topics.