The benefit of tags is that a single item can have multiple tags, so you're no longer constrained by having to decide on a specific folder hierarchy to organize them in. You can replace "folders" with tags entirely and still use tags as folders if you want, with the option of storing an item "in multiple folders" (give it multiple tags). Gmail has worked like this for a while: the inbox is just a filter which displays emails tagged with "inbox", which makes it even more confusing and inconsistent that Google's bookmarks and documents don't support this.