"Folksonomy" is a term coined by Thomas Vander Wal which describes an organization of information developed over time by the folks using it.

Vander Wall defines it as "the result of personal free tagging of information and objects (anything with a URL) for one's own retrieval. The tagging is done in a social environment (usually shared and open to others). Folksonomy is created from the act of tagging by the person consuming the information."

This is in contrast a taxonomy, which is created by experts around an ordered structure and systematic way of classifying information.  An effective taxonomy takes into account situations that require users to look for information, how users work, and obstacles that get in the way of users locating and accessing the right information quickly and easily.  However, this is a constant challenge as user situations frequently change. Folksonomies are created by how people use and access information, and therefore change as peoples use of the information changes.

An example of a folksomy is del.icio.us, a social bookmarking site which allows anyone to tag web sites they find useful and enables one to see the identity that created the tag as well as see other things that person has used that tag on.   Another example of a folksomy is a Tag Cloud, which is a visual display of frequently used information on a site.

See Wikipedia definition for more info.