Custom Taxonomies support is new feature included from 1.7. Till version 1.6 you were only able to select single category for Posts and Product Category for WooCommerce product. With this feature, now any taxonomy related to the post type you select are auto populated. There is no limitation in taxonomy selection such as tags, product color, event categories to name few. Also, you can now select multiple taxonomy terms (category, tags etc) as per your need.
Please check snapshot below for how it works.
Categories and Tags selection for post.
Tags selection for forum topics.
Product Categories, Tags and Color selection for WooCommerce Products.