Tags are meant to be used to organize your songs into categories. Think of tags as categories or folders. For example, you may want to have a subset of songs in categories called Acoustic, Worship, and so on.
To get to the tags, open the main menu and tap "Tags". After you do that, you will see a list of all your tags shown below.
Adding a tag - Tap the plus button in the upper right. This will open the Add/Edit tag view where you can enter the name of the tag.
Editing a tag - Tap the info icon to the right of the tag and this will open the edit tag view where you can change the tag name.
Deleting a tag - Swipe your finger right to left. This will make the "Delete" button appear. Tap the delete button and the tag and all of the associated data will be removed.