Tag and category is almost the same thing. Best explanation can give someone who uses both.

Categories organize, hierarchically. Tags need not. Tags provide meta-information, Categories need not. Tags cross-connect, Categories do not.

Or, even better

…categories as the table of contents for your blog, a kind of general outline that directs visitors to general topics that you blog about. Tags are more like the index page of a book, a list of key words people will use to search for specific terms.

• WordPress Themes, in general, automatically turn categories into tags.
• Categories are added at the time of writing the post and usually appear in the header or sidebar of most WordPress Themes, though they may be echoed in the footer. Readers gravitate towards categories long before hitting tag links to find the information they need.
• You choose your categories to classify posts within a topic collection.
• Your choose your tags based upon keywords and topics within your post content.
• Your categories and tags may be the same, or they may be not.

Categories can be also applied to links. If you want to categorize your external links, you can easily create categories and add different link into different category.

Eg. LATINA blogs, Favourite blogs, Life, Health, Education…

For further reading click here

A social network service focuses on building online communities of people who share interests and activities, or who are interested in exploring the interests and activities of others. Most social network services are web based and provide a variety of ways for users to interact, such as e-mail and instant messaging services.(source: wikipedia)

Today we know many services like that. Some of the most popular are: Flickr (for photos and videos), Del.icio.us (for sharing bookmarks), Shelfari (for sharing information about reading and building virtual bookshelves)…