The hashtag plugin transforms your #<word> entries into links to types. This is very similar to what happens in Twitter and Facebook. Using the hashtag as a fast way of tagging your content. This allows people to go check out all the posts you have about a certain subject.
We will increase the usability with time as we want to make sure that you do not create new tags like crazy when not required/useful. (i.e. if you have a single page with a certain hashtag, it will be useless to sit by itself in that list of pages referencing that hashtag. This can often happen because you misspelled the word after the hash character.)