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What are the pros and cons of using hierarchical data structure over flat data structure (more like tagging systems in blogs)

Ecommerce systems like ebay, yahoo shopping and yellow pages use product and service hierarchy trees to represent data but if one wants to create a open tagging based ecommerce system then what are the possible challenges and advantages (assuming high traffic site)

+1  A: 

Please see the related question about Tag hierarchies and handling.

Yuval F