It's interesting that Yahoo has decided that both the Folders and Tags can coexist with each other. It has the case to hale tags as the Web 2.0 predecessor of the old folder idea.

Google has particularly made this idea clear by it's then revolutionary design decision to drop folders and go for tags in gmail. In its beta verson of Yahoo! Bookmarks, Yahoo has decided to let both folders and tags coexist. The nice thing about tags is that you can apply a whole bunch of them to a single element: a single email, a single bookmark, a single blog post. Yet folders still have the advantage of being able to nest them within each other and thus creating a hierarchy, something which are not possible in the flat world of tags. Users are also used to folders, which is something convenient to give them. Perhaps tags would do something about their flatness in order to be more competitive against folders. Or are we going to see more web stuff having both tags and folders coexisting with one another?