An introduction to Taxonomy
Drupal's Taxonomy is about organizing your site by attaching descriptive terms to each piece of content. Those terms might describe what section of your site a particular page belongs to, or what topics are discussed in a given blog post, or what region of the country a photograph was taken in. These terms are organized in separate 'Vocabularies' so for example that recipe ingredients don't get mixed up with cities in Texas when you're trying to find out what travel-logs were written in Houston, or what soups use potatoes.
Setting up these Vocabularies, and the descriptive terms that belong to them, is the first step in organizing your Drupal site.
There are different kinds of vocabularies, and understanding how they differ can help you decide the best way to categorize your content.
- Lists of pre-defined terms -- a 'flat' vocabulary, i.e. colors: red, blue, green.
Create a 'flat' vocabulary
First, you might create a 'flat' vocabulary for basic organization called 'Photo Type'. To that vocabulary, you would add the terms 'Portrait', 'Stop-Action', 'Landscape', and so on.
Create a 'hierarchical' vocabulary
Next, to keep track of where the photographs were taken, you might create a hierarchical vocabulary called 'Location'. To it, you could add terms like 'Europe' and 'United States'. In a hierarchical vocabulary, each of those terms can also have sub-terms like 'France' and 'Illinois'. This makes it possible to tag a photo once with the term 'London' and retrieve it later with a broader request like 'Show me all the photos taken in Great Britain'.
Create a 'free tagging' vocabulary
Finally, to capture notes about each photograph that would be hard to plan in advance, you could add a 'free tagging' vocabulary called 'Keywords'. Rather than defining the terms in advance, a free tagging vocabulary lets you enter in new terms each time you post a piece of content. If two separate content items use the same vocabulary term, they will both show up when that vocab term is searched or accessed from a menu block.
With those three vocabularies in place, any new photograph you post to your site can be quickly categorized. Whenever you post a new image, Drupal offers you a list of the available terms in the 'Photo Type' and 'Location' vocabularies AND a place to type in terms for your 'Keywords' vocabulary. When posting a photo of your brother's wedding, you might select a Photo Type of 'Portrait', a Location of 'Paris' and type in 'wedding' and 'brother' as keywords.
If you're used to other CMS or blogging systems, these different vocabulary types might be refered to as 'categories' or 'sections' or 'keywords'. It's important to note that Drupal does not require you to use these vocabularies
Also note that different kinds of content can use different vocabularies when it makes sense. For example, News articles and Images might share 'Keywords', but 'Photo Type' obviously only makes sense for one.
Mixing and matching these techniques in Drupal allows you to create the organizational system that best suits your needs. Getting used to it can be tricky at first, but if you take the time to think through your site's organization, the results are worth it.
(there's so much great information on the Drupal.org site; you just have to know what you're looking for. I'm only blogging this as I am working on a document which needed a really good section to clearly explain Taxonomy to non-techical folk; and thought I'd better save this somewhere for future reference. @mylesdavidson) 
