The TagFolder plugin enhances Obsidian by displaying tags as a folder-like hierarchy, enabling better organization and navigation of notes. It supports nested tags, custom tag combinations, and virtual tags to reflect the freshness of notes. Users can configure pinning, sorting, and filtering of tags, as well as customize the display of associated files. Advanced features include treating folders as tags, managing tag storage methods, and hiding or merging redundant tag combinations. The plugin offers flexibility in managing and visualizing complex tag structures within a vault.