What are ATAGs for a device that uses Linux Kernel?

ATAGS are ARM tags. They are used to carry information such as memory size from boot code to kernel. Some references (which in turn lead to other references): booting standards, customized ATAG.

This reference arm/Booting explains theory, but does not much tell a user what to do.

On my target I use the following in my U-Boot config: CONFIG_CMDLINE_TAG, CONFIG_SETUP_MEMORY_TAGS, and these in my kernel config: CONFIG_ATAGS=y, CONFIG_USE_OF is not set. Not sure if that is sufficient for you but it gives you clues to search on, good luck.