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Wow is technorati still around! Seems to me the social bookmarks have pretty much made it irrelevant.
The way I had it explained to me is that tags are your posts keywords where the category is a means of dividing up separate thoughts.
The best example I can come up with is if you have a food blog. You may have categories like salads, pies, etc. Now lets say you write a post about how to make a cherry pie, then cherry pie would be the tag and the post would be filed under the pie category.
For adult, you have a niche blog, categories would be the sub-niche and tags would be the descriptor in the text.
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