You can't create new ones afaik, but you can add and report tags. If enough users do either and it meets the threshold it will be added/removed. The order tags appear is also relevant, if the first tag is FPS then it's the most voted tag. I'm sure devs/publishers can set initial tags but after that it's users that maintain them.

It is a good idea to keep this simple in theory, but it also is exploitable. Especially since you can't search by tags set by users vs devs/publishers. Or the first 4-5 tags. I see a lot go into safeguarding reviews, but very little in tag abuse. There's cheep no effort games with a crazy number of tags - most people can identify trash, but if it can be abused, then what about other legitimate games?

Steam also categorizes tags in 4 types: Genres, Visual, Theme, and Features. It would be nice to search, say, games that are primarily one genre. When I search for JRPG, I don't want a City Builder that has JRPGish elements, but I'd be ok with a JRPG with City Builderish elements. You could really narrow down what you want if you used some advanced logic. But that's not simple, so I can see why they don't, I just wish I could if I wanted to.

But I'd have to disagree, if it's open to abuse, then it is a dumpster fire. The thing is that the alternative is....well they aren't doing it. It's one of the few things I think, if a competitor focused on and got right, would really hurt steam. But no one seems interested in doing that, so for now, steam is all we got.