Your tags are what are used to find your items in Etsy searches. They are also valuable in being found by search engines such as google. Essentially, these are the words that describe your item to someone who is looking to see what is available in a certain category.
Sometime shoppers only have a vague idea of what they are looking for... but MOST of the time, they really want something specific. Even if they start out looking really broad... chances are they will narrow the search when the results are overwhelming. This is where effective tagging comes in to help ensure that your items are found.
There are several guidelines for using tags effectively that I hope will help clear up some misconceptions and help you figure out the best way to approach this somewhat tedious but vital part of listing your items.
Use all your tags. No excuses... every tag has the potential to bring in a customer and if you don't use them you miss out. If you can't think of what to use, examine your item and consider putting "handmade" or "vintage" (they aren't automatically included and people do search for them!), include colors of the item to assist in being found for treasuries (which can also mean sales and hearts). What size is it? Who is it marketed for (kids, moms, boys, etc.)? are there common alternative spellings of other tag words? What about different terms for the same item (hat, tuque, beanie, etc.)? Texture? Material? Theme (rustic, chic, bohemian, etc.)? Search for similar items and see what other tags your competitors are using... doesn't mean they will be effective, but it might help you think of ones that didn't occur to you! Oh yeah... and include your shop name in a few! Sometimes people will search for your shop but forget to change to "shop search" in the dropdown menu. Tagging your shop name means those people will at least get a result.
Perhaps you have the opposite problem and 13 tags is not enough! (This is me, I'm always wishing for more!). Etsy will now allow short applicable phrases in their tags! This is very useful AND effective because (and this is the best part!)... all words are ALSO search-able separately even if you put them in a phrase! YAY! So, for example, you can add a tag "security blanket" and another of "baby blankie" and you will also get results for "security blankie" or "baby blanket". This means you can use two tag spots rather than the four you would need to put each word separately. If you do this though... it is vital that you ensure your phrases are VALID... not just "stuffing". You can also use this method to get specifics... such as a tag of "kelly green" would catch those looking for that narrow a color AND also catch those just searching for "green".
Make sure your tags ARE what the item IS. Some categories are huge and it is easy to feel like your items are getting lost. You may be tempted to add a tag that isn't quite descriptive of your item to hope to end up in a narrower category. However, this doesn't work. People searching for silver earrings are not going to look at a bracelet... and chances are they are going to be annoyed that you tried to "pull a fast one" on them and may put a negative taste in their mouth about your whole shop. Doing this also clutters up the categories and, effectively makes your properly tagged items HARDER to find. Plus, it's against Etsy rules and you can very easily be reported. Bottom line... respect your own items and the community and use tags the way they are meant to be used.
Many teams have team tags. You can include these to help your items be found by loyal team shoppers AND for use in treasuries! You don't have to tag all your items... but a representation of them is a good idea. If you have the space though, the more team tags you use the easier it is for people on your teams to find and favorite your items... and this can be a very effective networking tool!
With the new algorithms Etsy had in place with the change to relevancy search... there have also been some effect on tags. Tags and titles now work together! This is great because it essentially means that you have the ability to "add power" to your tags by mirroring them in your titles. SO, (I'll use an example from my own experience) what this means is that when I have the exact phrase "Crochet Doll" in BOTH my title and my tags, it is given a higher weight in search for those terms than if I separate the phrase into "crochet" and "doll" tags. This has taken some trial and error, but in a category that has a lots of results it can help improve your ability to be found by your target customers.
There is also another approach you may wish to explore. Some categories are so huge that it is just impossible to be found if you don't have a lot of inventory. You may choose to not focus so much on the MOST common searched terms and instead try to capture those customers that use alternatives. For example, "pacifier clip" gets 8860 results... but "soother clip" only gets 841. While it is true that more customers are searching for pacifier, I can't compete with those stores when I only list a few clips in my shop because my preference is for customs... so by using my tags (and titles) to target the fewer customers that are looking under "soother", I get sales where I didn't before. While this may be an unconventional approach... it is working for me. (Shhh... don't tell anyone!) :)
Tagging is tricky. It's important to remember to reevaluate your tags occasionally, and to make some changes to them on similar items (don't just copy) to try to find which ones are the most effective. You can use tools like Craftopolis or your Shop Stats to see which terms are being used to find your items... but don't be afraid to branch out and try something new! One of the best things about tags is that they are editable... so if something isn't working, switch it for something else and see what happens!
So... I hope this has been helpful and perhaps you've learned something you hadn't thought of before!