Let’s begin with an example – Hotmail and Gmail. In Hotmail, we can create folders and allocate emails to those folders. But, we can allocate an email to only one folder. However in Gmail, a single email can be labelled or tagged with multiple labels. The Gmail idea seems great when we cannot categorize an email into particular one category. But it has consequences. If same email is labelled with two labels, it will increase count in both labels, which may not be ok for all. In other many tag-based systems, users need to type tags manually. It is irritating. A simple typing mistake will lead to creation of new tag. Hotmail has another advantage. In Hotmail, we can drag an email to required folders in sidebar. However, this is not the case in Gmail. Dragging same email to multiple labels seems confusing. So, we have to mark same email multiple times with labels. If an email has multiple labels and we remove one label accidently, it accepts easily. But, we may not remember the label name to label it again. In case of folder based application, it is not the case as one-to-one relationship has to be maintained between the item (email) and folder.

Delicious and Yahoo! Bookmarks are popular bookmarking sites both offered by Yahoo. Delicious is tag based however Yahoo! Bookmarks uses integration of both. In Yahoo! Bookmarks, bookmarks can be stored in a folder and also tagged with multiple tags. Users are able to view bookmarks either folder-wise or tag-wise.

Now a day, more and more applications are offering tag-based systems or integration of both. Popular photo sharing sites like Flickr, Picasa offers integration of both. Blogging site Blogger.com offers label based system while Wordpress.com offers integration of both.

Personally I favour folder based system, as tags for me seem to be more specific and folders look clean. However integration of both is of course excellent.