First there were wikis, collaborative web sites, some of which allow anyone to author or edit content, Wikipedia being a prime example. Now there are "folksonomies", a "grass-roots tagging system" for the web, standard subject terms that evolve as individuals attempt to make content available to others.
It's a hard concept to explain, but Newsweek does a good job of it in their recent article "In the New Game of Tag, All of Us Are It."
For librarians, the world really is turning upside down. Rather than using an existing system of subject terms, such as Library of Congress subject headings, to impose order, folksonomies seem evolve from the primordial soup, and according to the article, are surprisingly effective.
Examples of sites that use such tagging schemes are the photo-sharing site, Flickr and del.icio.us, a social bookmark manager.
Spontaneous order from chaos. What's the world coming to!
For a response to the article, and a better explanation of how subject headings really work, see Gary Price's article on SearchEngine.com, Newsweek Talks Tagging.
I would highly recommend listening to this audio recording. Clay Shirky does a very good job of speaking about this topic concerns you mention.
http://www.itconversations.com/shows/detail470.html
He makes the point that the LOC subject headings exist so that you can find physical books on a shelf. Physical books can only be in one place at a time. Digital information however has no such limitations. There is no "shelf", and imposing one is presumptuous. Focus on search, allow for ad-hoc categorization. Don't impose a hierarchy that doesn't exist.