Digital audio files can contain, in addition to the audio track, related text and/or graphical information. The information you're probably familiar with take the form of Song title, Artist name, Album name, Year and Genre. This is the information displayed when you playback a digital audio file on your computer or portable device.
The process of including information other than sound into these digital audio files is commonly referred to as "tagging" in which you "tag" the audio file with additional information that describes the audio file.  The original standard for tagging digital files was developed in 1996 by Eric Kemp and he coined the term ID3.  At that time ID3 simply meant "IDentify an MP3".