Tags are metadata assigned to submissions, that are entirely customizable. You can assign any tag to any number of submissions, and then filter for all submissions that have this tag.
Tags are most commonly used to indicate the stage of a submission in a workflow: "processed", "Pending Amy", "Received".
However, tags can also just be used as categories, e.g. "Research", "Proposal", "Request" or "History", "Modernism", "Art" etc.
To apply tags to submissions, view a list of submissions and choose "Bulk Action" > "Tag submissions" with the list of submissions you would like to tag selected. Under "Add New Tag" type in the tag, and click "Add Tag" to add, and do this for as many tags as you like. Confirm and apply these tags by clicking on "Modify Tags for X Submissions" (with X being the number of submissions you have selected).
To view the tags for submissions, be sure to "Customize (the) View" for the list, and under "Columns" click the "+"-sign on the "Tags (text)"-column. The list of submissions will reload and display the tags.