Twitter needs tags.
Twitter doesn't have tags right now.
It does have names, and if you precede a name by an @, you can follow that name.
Sometimes you want to share a conversation but not create an ID.
For instance, when San Diego was on fire, the tag #sandiegofire was used in Twitters.
That's a hashtag.
No software uses hashtags right now.
But if you are regular about using it in your posts and people catch on, maybe someone will write code.
The use of #hashtags to encode names of channels is shared by IRC.
For instance, Joi Ito is founder and op at #joiito on IRC, according to his LinkedIn.
Channel names live in the same world as hashtags and tags.
If you were to build software to use hashtags, what might it do?
Wiki + hashtags = autolink to a wiki where the name space was tags.
IRC + hashtags = autoconnect to the channel.
Google Search + hashtags = search for the tag.
Google Adwords + hashtags = display relevant ads for that tag.
Flickr + hashtags = display a page with that Flickr tag
LinkedIn + hashtags = search for someone with that tag in their profile.
Facebook + hashtags = search for someone with that tag in their profile.
So, essentially, a hashtag is a search key into a tag space, marked with a #.
Indeed, you can use any search engine that searches Twitter to search for them.
Or, at least, any search engine that doesn't ignore the punctuation.
For more about hash tags, read Chris Messina (factoryjoe).
His Twitter hashtags for emergency coordination and disaster relief describes #sandiegofire.
Chris didn't think much of #arbcamp, but we'll forgive him for that just this once.
And I don't think much of the name hashtag.
I'm going to call them octothorpetags.