When you add more content to your site, you need to organise them in a way so your readers can find them easily. WordPress offers categories and tags to sort posts. Categories and tags are the two main ways WordPress uses to associate posts with each other or group number of posts together.
Once upon a time, WordPress.com only provided a Category option.
Categories allowed for a broad grouping of post topics, but when you wanted to describe a post in more specific terms, more categories were required. That led to very long category lists inside the blog and very long lists in Categories Widgets.
So we now have tags, too.
Tags are similar to categories, but they are generally used to describe your post in more detail. Categories are the main way to group posts, and tags are the smaller details that connect posts together.
Do I have to use tags?
The use of tags is entirely optional (although each post must be attached to at least one category).
Are categories and tags hierarchical?
Categories can be arranged in a hierarchy. Tags, however, exist in their own right and have no set relationship to anything else.
Is there any advantage to using tags or categories, or both?
No. But as suggested for broad grouping use Categories and for connecting smaller details use Tags.