Microsoft describes Microsoft Tag as “a breakthrough technology that transforms everyday things in the real world into live links to online information and entertainment. From your mobile phone, simply snap or scan a Tag image anywhere you see it – in editorials, advertisements, product packaging, signs and storefronts – and gain instant access to Websites, videos, reviews, schedules, contact information, social networks, discounts, promotions and more!”
Or put another way, Microsoft’s snappy tagline (excuse the pun) describes Tag as - “Linking real life with the digital world.”
I’ve created a couple of tags below to illustrate the principle. It works better when the tag appears in a non-digital environment (a poster, a business card, a magazine advert, etc) and links you into a digital environment (a web page, the contacts section of your mobile phone, etc). But hopefully it gives you a flavour.
One is a tag for my LinkedIn site:

Microsoft Tag: My LinkedIn Site
The other is a tag to this very blog:

Microsoft Tag: Howie's Blog
You’ll need to install Microsoft Tag application onto your mobile phone, which you can do quickly and easily by following the instructions at http://www.microsoft.com/tag/content/download/. Then you point your phone at the tag and it recognises it and executes the appropriate action.
We (at Company Net) will be putting vCard tags on our new business cards. Recipients with Microsoft Tag installed on their phone will be able to scan the tag on the card with their phone, and this will automatically transmit our contact details to their phone. A small application of the technology perhaps, but the potential applications are limitless.
A few of them are showcased on the Microsoft Tag site.