The difference between tags and categories are explained in LIferay in Action book i am just pasting those contents hope it may help you
The difference makes a lot of sense when you think about it. Categories are predefined structures into which content can fit. Think of them like a table of contents or an outline: the categories are defined generally before the content is created. If you’re building something like a catalog of different types of music, you might start with some high-level categories, like Classical, Jazz, and Rock. Then you’d define subcategories for each one, such as Baroque and Romantic for classical, and Metal and Progressive for rock (I don’t know anything about jazz, so I won’t venture to subcategorize it—I know, this is painful for some of you to hear, and I apologize; I will broaden my horizons some day). Then, as you’re loading content, you can put your content in these previously structured categories. This is sometimes called a taxonomy. Categories are created in the Control Panel by those with administrative access, who are creating large amounts of content that needs to be organized.
Tags are similar, but they lack the structure of categories. Tags are generally created by users, although any users—including administrators—can tag content. Think of categories as being like a table of contents, and think of tags as being like an index: a flat list of topics that is applied to content either at its creation or after the fact. if you’ve browsed the categories of your content and have chosen Rock > Metal > Yngwie Malmsteen, you might find this particular artist tagged with adjectives like guitarist, classical, and self-indulgence. Although these descriptions don’t rise to the rank of being browsable categories, they do further describe this particular artist, and who knows? Someone may be searching for music similar to that. Tags are sometimes described as a folksonomy, because—well, they’re created by the regular folks. Sometimes they can be humorous. Recently I was browsing a news site that had the headline, “Facebook is down”; somebody had given that story the tag and- nothingofvaluewaslost.
