A tracking tag lets you add information to a hit about where the visitor came from. For example, the "Take The Tour" button on the home page has a source=front-page tag on it. Here are the hits on the tour link, shown by source tags:
Tags help you figure out where to focus your efforts. Do you get more traffic through Twitter or Facebook? From the front of an e-book or the back? If your links are properly tagged, you can tell.