That's exactly what they are used for, but probably what's not clear is exactly when and where you can use that grouping and filtering.
Tags are useful when you would want to split different part of your applications in different groups. For example, if you should create 20 users, and 10 are operators and 10 maintenance engineers, you will most certainly add them to their specific User Groups, but it's nice to also tag them accordingly to allow you to understand where they are required when looking at them.
Or if you created a whole new capability for your application, and you need to export all the entities that belong to that capability.
Here are a few locations where this kind of filtering is useful:
- When browsing for any type of Entity
- When you export via the Import/Export menu
As a note, tagging is not mandatory, just useful during implementation for the reasons above.