Tagging can be used in addition to Candidate Watchlists to keep track of potential and current candidates.
The main difference is that Watchlists are similar to call sheets, whereas, tags are like searchable post it notes.
Imagine: you have a list of 25 potential candidates for your ER nurse position, but you can't remember which candidate really liked skiing and would be potentially open for relocation up north.
You can use tags to find which candidate it was who liked skiing. (See Below)
You can use these tags to keep track of anything you would want to remember and be able to search by in all your different Watchlists, such as "follow up on" or "emailed on".