This article “Better living through Taxonomies” gives a really good clarification of taxonomies and controlled vocabularies. It explains the concepts very well and gives some examples also. I felt it was a nice refresher on what taxonomies are and why they are important.

And an example of a hierarchy (because visual examples are awesome):

An example of a term hierarchy might be:

• Computers and internet
  • Software
    • Internet software
      • World Wide Web software
        • HTML editors