The purpose of a blog is to communicate ideas to a wider audience than your teacher or classmates. Tags and categories can help to create and to build the audience.
Tags and categories on posts are used to help readers locate information in different ways.
Categories are like chapters of a book; they provide a general overview of the topics you blog about. Whereas tags are more like the index at the back of the book and explode the topic into a million bits.
You are required to include tags for each post and you will be required to develop and include categories for each post by post #3
For additional information read Adding Tags and Categories to a Post. Follow the directions to add a Tag Cloud widget in your sidebar.