What's a tag?
Just a label or category that describes a set of bookmarks, which presumably share something in common.
What's a Bookmark Tags tag?
Bookmark Tags "tags" are defined by your bookmark folders—tags in quotes because they exist only conceptually. Two folders with the same name represent the same tag. The set of bookmarks that are tagged by a tag is all the bookmarks contained in all the folders with the same name as the tag. The set of tags that tag a bookmark is the set represented by all the folders that contain the bookmark.
Tag names are case-insensitive, so two folders named "crayon shin-chan" and "Crayon Shin-Chan" represent the same tag. Tags can be multi-word, in which case they're surrounded in quotes.
How's this better than folders alone?
If for any particular name you've only got one folder with that name, then Bookmark Tags is just a fancy way of navigating your bookmarks tree and probably not so useful.
The key is that if you've got two (or more) folders with the same name, and one isn't an ancestor of the other, and bookmarks under folders of the same name are considered to be in some common set, then you've got a relationship among those bookmarks that can't be expressed in a folder hierarchy alone. You've got tagging (kind of), which everyone knows is the bee's knees.
How do I tag a bookmark?
When you add it or when you edit its properties:
Select tags by clicking on them in the tag cloud or by typing them into the text box. Bookmark Tags will autocomplete tags for you as you type. If it autocompletes the tag you wanted, press Tab to skip the cursor to after the tag. Press Esc in the text box to remove the last tag you entered and Shift+Esc to remove all tags. If a tag contains multiple words, surround it in quotes, like "The Anniversary." To make a new tag, just type a new name.
How do I use tags to browse my bookmarks?
The tag menu, which you can access from its toolbar button:
You can also use the tag browser sidebar:
The sidebar can be called up by its toolbar button, the sidebar menu, or Ctrl+Shift+B.
The browser displays only those tags and bookmarks related to the tags in the query. (Two tags are related if they have at least one bookmark in common.)
Clicking on a tag will add it to the query. You can also type tags into the text box and press Enter. Bookmark Tags will autocomplete tags for you as you type. If it autocompletes the tag you wanted, press Tab to add the tag to the query. When typing a tag with multiple words, surround the name in quotes, like "Coffee Cat."
To remove tags from the query, click a tag under the text box. By default, all succeeding tags will be removed. You can right-click to bring up a menu for more choices or change the default action in Bookmark Tags's preferences. You can also press Esc while typing in the text box to remove the last tag.
To reset the query, press Shift+Esc in the text box or click the button next to the text box.