The world's biggest tagcloud
Tag clouds are a way for websites to try and convey what topics are popular to the user in a way that needs very little reading. Therefore making the popular ones larger than the rest is quite an obvious answer. Tag clouds are commonly used on blogs where a loose "tagging" system is used to mark-up posts (rather than slipping them into a single category like I do on Seopher.com, they assign keywords to the post). The more posts that have a specific keyword; the bigger the word gets in the tag cloud.
A good example
My good friend Oli from ThePCSpy uses a tag cloud to help convey this information to his users and I think it works ok. I know he spent quite some time battling with the code for it and it's one of the better tag clouds I could think of.

As you can see, it's not perfect but you have nice spacing and a clear indication of what's hot and what's not. What Oli has done is not have too many tags cluttering the cloud; he has several he uses a lot and more that he uses infrequently. This means you can fit the cloud in the palm of your hand.
A bad exampleI'm a member of the 9rules community (within both the Web++ and Technology topics) and yet I can't imagine why this feature was ever developed. The guys who work at 9r (Mike, Tyme, Scrivs) are all lovely people and very grounded, they don't do pointless things. Yet, this tagcloud is possibly the most pointless thing imaginable.
As you can see it goes on for quite some time so excuse me for using the space (I limited it to only 152px wide, so imagine how long it is normally...).
What we're looking at is the 30 day tagcloud for the Web++ community; outling all the posts made and their relative popularity/freshness. I'm entirely certain that you gain nothing having this on the site.
Each community has it's own tagcloud and I imagine each will be equal in dimensions to this one.
Conclusions
I don't consider tag clouds to be an effective means of conveying information to the user. I find them indicative of a "fad" that has no real application or use; although I appreciate that they are desirable and that if you feel the need to implement a tag cloud, it's probably best to do one like Oli has... You need a concise list of tags so that users aren't confronted by 400,000,000,000px of scrolling.
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