Tagging is useful at personal level for categorizing data of any size and type without the constrain of hierarchy.  While WinFS is more than this, adding tagging to traditional file system will deliver most of the benefits WinFS offers at the user experience level.

But IMHO the real power of tagging can be hatched only at the workgroup level.  This means introducing new ways (UI-wise) to expose and discover tags others use with the same level of ease as children learn new words.