I often get asked this question?
This is a new feature of Sharepoint 2010, which takes Sharepoint to a whole new level. social tagging is also referred to as folksonomy.
Tagging of a content is basically assigning description words or categorising the content. There are two types of tagging social and expertise tagging. social tagging refers to content and adds metadata to content, i.e describes what th content is and what it is about. Expertise tagging is related to a person and describes the person. For example skills, projects they have worked on etc.
Social tagging helps users to grow the portals information architecture over time where as expertise tagging helps build relationships and connections to others in the organisation.
Hope this helps.