Tags, aka hashtags, are instance-wide (not just in a community) and interoperate with Mastodon, Pixelfed, Mbin. Anyone can make a new hashtag and they are completely unmoderated.

Flairs are a limited list determined by each community's mods and are only used in that community. They will federate with other PieFed instances and with Lemmy (when they finish coding what they're calling "tags", a really unfortunate choice of name).