Open System would mean that a user can type anything in the tag field when submitting content.
Closed System means that an administrator would define those tags and the user could only pick from the options the administrator defined.
Regardless of what system you choose as an administrator, if a user were to click a tag on a content piece or search for a tag, they would be brought to a search results page with all content which has been "tagged" with that particular tag.
For the example I referred to in my last post, imagine now that we have an Open System and a user created a topic called "Peanuts" and tagged that topic with the tag "nuts". The next day, the administrator changes to a Closed System and has the tags "Fruits" and "Veggies" available. If we go to the topic "Peanuts", we will still see that it is tagged with "nuts" because this change does not remove existing tags from content.