When you add a tag to a Product, you are adding a keyword and search term to the Product. This can help you manage your inventory. You can filter based on tags to help you organize your data and quickly find Products. Unlike Product Type, a Product can have multiple tags.
Tags can also be used to set up discounts applicable only to specific items, and can be used to filter items in menu integrations.
To filter your inventory based on tags, go to the Inventory page, find a Product that has the tags that you want to filter on, and select the tag.