This tag is used by the system on questions that have had all of their other tags removed.
All questions in the system must have at least one tag. Normally, it is not possible to submit new or edited questions that do not have tags; the system will reject the submission until a valid tag is applied.
However, there are some situations where this tag is used. When a tag has existed for six months and only been used on one question, the system deletes the tag. Also, when there is community consensus that a particular tag is not necessary to the community, then a moderator can remove a tag. When such a situation happens, the subject tag is stripped out from all its associated questions. If no tag remains due to the change, this tag, untagged is instead added as the question's only tag, to obey the rule of "at least one tag per one question".
You can actually help organize the questions with this tag. If an untagged question is good enough for preservation, then you can reassign a tag which describes the question well. If the question is bad, use your usual methods of judgment: Downvoting, flagging, and/or voting for close/delete.