I've been waiting (impatiently) for a tagging UI like this to come to iPhoto for some time now, and I'm generally happy to say that iPhoto '08 finally does tagging well (for the sake of this post, however, I'll be using the terms 'tags' and 'keywords' interchangeably, since iPhoto refuses to adopt the web 2.0 terminology). If you display keywords beneath your photos (View > Keywords or shift-command-K), you can simply click below your photo in that field (even if it doesn't have any keywords yet) and begin typing. iPhoto will attempt to auto-fill from your keyword library, or it will add new keywords you create on the fly.
For keyword ninjas this still might not replace powerful plug-ins like Keyword Manager, but it's definitely a step in the right direction for the general iPhoto user. Since it's barely been 24 hours, Keyword Manager understandably hasn't updated yet, but I don't find myself gasping for breath without it. Thanks to this improvement and others which I'll explore, iPhoto has gained respectable features that finally allow users to manage their library with the power of tags. Read on to see what else is new with iPhoto's keyword features.