Go to View > Collapse all Tags so you can get an uncluttered view of your tag categories. If you just started with Elements, you probably only have the default categories of Favorites, Hidden, People, Places, Events, and Other. Clicking an arrow next to a category expands it so you can see any nested subcategories and tags. Expand the People tag and you will see that Family and Friends subcategories are already provided. Most of what you do with categories, sub-categories, and tags can be done from the buttons at the top of the tags palette or by right-clicking in the tags palette.
Tags are like keywords that you use to identify your photos and perform searches. Unlike many programs, you don't have to type into text boxes or tediously click on checkboxes to apply keywords to your photos--it's drag and drop! This seems to make the tagging process go much faster. You can select multiple photos and tag them all at once, and you can drag multiple tags at the same time.
Elements allows unlimited categories, subcategories, and tags and is very flexible in how you can use them.
