Matt Cutts works for Google and specializes in SEO issues. A question was posed to him about tag clouds:

Do tag clouds help or hinder SEO? (or do they have no affect)

What is a Tag Cloud?

A tag cloud is a visual depiction of the keywords (topics) on a blog. Blog posts are marked by certain keywords, all the keywords combined make a tag cloud. Depending on the importance of a keyword or its prominence on the blog, the tags can be larger or smaller in size. Here is an example:

What is a Tag Cloud?

Most blogs have tag clouds instead of categories, some have both. Tags are links pointing to archives on your blog for that particular keyword. An example would be SEO

In answer to the question, Matt Cutts Suggests You Should Not Use Tag Clouds. His reasoning is simple; tags are bunch of links. It is never a good idea to stuff your blog with links, that’s a big NO NO.

He personally doesn’t have tags on his blog, instead he uses categories. Watch the video:

Do you use tag clouds on your blog? Does this video make you think about your decision to use tag clouds?

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