What is "Tagged PDF"?

Tagged PDF is a PDF file that contains meta-information around certain groups of PDF instructions inside a page content. This meta-information has many use cases: Text-extraction, content-reflow, document accessibility, geographic information in PDF containing maps, etc.

If you need to know more details about this topic I would recommend reading Chapter 10 - Document Interchange of Adobe PDF Reference version 1.7.

The main reason it is used is for accessibility. With the correct tags, a screen reader (for a blind person) can understand where headings fall, what is a table/footnote/graphic and so on. Also there is a feature called PDF Article Threading which is useful for magazine or newspaper layouts where an article is split across boxes/pages.