Here's how it works: when you're browsing your own or your friends' photo albums, simply click the "add tag" link below the bottom right corner of the photo. Then click your mouse over the friend you would like to label. A box will appear, prompting you to type your friend's name. As you type, the field will auto-complete so you can easily find the orkut friend you'd like to tag. When you browse tagged photos, hover over the name of a person to see which person he or she is in the photo. If you click, you'll be taken to his or her profile.
When one of your friends tags you in a photo, you'll receive an email. If you'd like to turn this notification off, you can go to notification settings. If a friend tags you in a photo and it's not you (or just a bad photo of you!), you can click on the trash can next to your name and delete the tag for good. The photo owner also has permission to delete any tags on his or her photos. If you'd rather not let your friends tag your photos, or be tagged in any photos, you can disable the feature completely in your privacy settings. Many people have already begun tagging their photos. Happy tagging!