Tag clouds are those little jumbles of keywords that you see on some blogs. They usually link to a keyword search within that website for all posts that contain that particular term. To the beginner SEO, this may look like a good way to stuff your pages with keywords that link to relevant sections on your website.
A better practice for getting pages indexed within your blog, is to put a list of the categories in your sidebar. Categories provide Google with a much better system of indexing your content.
The only time I would recommend using tag clouds, or when the user experience requires them. In the case where you might be running your own news website, trend blog or something else where the popularity of certain terms is important.
