Product Tags have a number of uses. In particular, they expand the possibilities of Shipping Rules, allowing you to apply a single action to a broader range of Products. Learn more about Shipping Rules.
Without Product Tags, you could write a Shipping Rule that acts on orders based on individual SKUs. However, if you sell many Products that share attributes or that need similar fulfillment processes, each with a unique SKU, you can use a Product Tag to apply that same rule to a wider range of Products.
This also simplifies maintaining your Shipping Rule should you add or remove Products from your inventory. Rather than update the Shipping Rule, you can simply add or remove Product Tags from the appropriate Product SKUs.
For example, a merchant might have a subset of Product SKUs that are top sellers and are therefore picked from a smaller section of a warehouse that just contains those top selling products. It is important, therefore, that orders that contain only top selling SKUs be routed to that section of the warehouse.
With the All SKUs Shipping Rule condition, you can easily identify the orders where all line items specify SKUs that have a specific tag:
The other Shipping Rule condition for Product Tags checks if any SKU on the order has a Product Tag. For example, if some of your products are fragile but others are not and if even one line item is fragile you want to use special packaging, you can easily detect those orders with the Any SKUs condition: