This one comes up a lot: CiviCRM gives you both tags and groups, and it's not always obvious which to reach for.

Groups are for people you'll actually do something with — a mailing list, a membership category, an event's attendee list. If you're going to email a set of contacts or check who belongs to it, that's a group.

Tags are more like sticky notes — “board member”, “needs a wheelchair-accessible venue”, “prefers phone contact over email”. They're for flagging something about a contact rather than managing a list of them, and a contact can carry as many tags as make sense.

A rough rule that holds up well: if you'll ever send something to the whole set of people at once, make it a group. If you're just noting something about individuals, use a tag.