Tags in Finder are unassuming and can be easily missed, but I think it is the way that Apple is going to attack the file system long term. As Mr. Gruber stated on Systematic, many of the problems with common folder-based hierarchies are solved by the use of tags in the sense that no document has a single location with which it is associated. Instead, tags allow documents to exist in any number of locations based on its specific categorizations. In the Finder sidebar, by default, no internal or external drives are shown anymore because Apple doesn’t want the user to have to delve into the file system. Instead, the user gets “All Files”, specific “Favorite” locations that are often defined by what they contain—Applications, Documents, Downloads, and so forth—and, now, Tags that automatically populate based on what the user adds to their documents. If all the documents in a computer were tagged well, there would be no need for folders. Instead, tags act as folder-style designations; a user could search for specific tags or use the built-in Tag list (“Smart Folders”) in the sidebar. In addition, a list of all the documents on the computer separated by their file type would be sufficient for most users who want to find their images, PDFs, spreadsheets, etc.
Which gets me back to my original follow-up point: Tags in iOS. If nothing else, the realization of this hand-off capability has strengthened my case for an iOS implementation of tags moving forward, although I believe that Apple will deemphasize file extensions to promote filetypes and tags, as Jack Wellborn suggests. The implementation specifics aside, I stand by my statement that “Photos” on iOS and “All My Files” on OS X show us the ideal way that files might be accessed and arranged in iOS for use across multiple applications.