I can't think of any practical applications apart from the one given over at Web Developer Plus - but this is too cool not to share.
The basic example was that if you're running a movie review blog, categories for genre and tags for actors/actresses may work, it would be nicer to have a taxonomy of actors and a taxonomy of genres to categorise them by. Fortunately, it's very simple to add them:
add_action( 'init', 'create_my_taxonomies', 0 );
function create_my_taxonomies() {
register_taxonomy( 'genre', 'post', array( 'hierarchical' => false, 'label' => 'Genre', 'query_var' => true, 'rewrite' => true ) );
register_taxonomy( 'actors', 'post', array( 'hierarchical' => false, 'label' => 'Actors', 'query_var' => true, 'rewrite' => true ) );
}
Placing that code in your functions.php file would add two new boxes to your post page in WP2.8+ that lets you add tags within your custom taxonomy. For more information, check out Justin Tadlock's post on Custom Taxonomies
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