There are three ways you can apply a tag to a contact:

Contact Wizard

Tags can be applied as you are creating a new contact.  Enter one or more letters to view any matching existing tags.  If the tag you are after doesn't exist, continue typing to create and apply a new tag.

Once the contact is created, the applied tags are visible on the Contacts screen.

Import a Contact

When importing a new contact, a column is provided to add tags to each contact.  Enter all tags for each contact in the Tags column, separating each tag with a comma.

Contact Details

Tags can also be applied or removed to existing properties from the Contact Details screen.