I know that many times I struggle to fill in my tags, but there are also a lot of times I must choose one tag over the other for lack of space. I have recently found two ways to solve this quandary.
First, a tip from my bag of tricks. If you have two words that will fit in one tag, use both, even if they are unrelated. Now, Etsy will tell you not to do this, but the truth is that the words will come up individually if searched. Thus, if you have 'blue' and 'peace' in the same tag space, they need not be searched together to come up in search results. I have tested this over and over and it always works. You have a total of 18 characters/spaces available; use all you can! You can conceivably turn 14 tags into 28! Well, not quite that many, but you get the picture.
My next tip is to check out Tools For Etsy's 'Tag Wars.'
Tag Wars compares one tag against another and shows you the number of listings with each associated tag. Below the results there is a Tag Summary Cloud and Materials Summary Cloud with tons of other suggestions! Ones in bold are main ones being used (the bigger the tag is the more it’s used on etsy).
Use the tag with the most listings or not? That is a question of opinion and strategy and one I can't answer. On the one hand, you may get lost with the more popular tag, but you may not be found if the less popular tag is too specific or obscure.
Find out what tags you already use most frequently by looking at your shop'sown tag summary cloud. On the Quick Menu at the top of the page, click Listings. Enter your shop name and up comes a bunch of info including your tag cloud. As for all of the other shop info...that's a post for another day.