There are many options when it comes to applying metadata and taxonomy to SharePoint content. SharePoint 2010 introduces a new farm service to provide a centralized taxonomy that supports hierarchical terms. In 2007 we only had the choice and Lookup columns which are still available in 2010 so why would you still use the lookup column?

Figure 1: Column choices in 2010

Many people would say that you should drop the old columns from use because they can't be shared across site collection but this is not correct as they can be shared across site collections using the Content Type Hub syndication feature of the Managed Metadata Service.

Limitations on Multiple Selection

Unlike the Managed Metadata column, the Lookup field allows column filtering on a single value even if there are multiple values selected for list items. The example below shows a look-up column that has multi-selection enabled and list items that have more than one lookup value selected. Filtering the column on a single value will still display matching items that have other values also (uses "Contains").

Figure 2: Multi-select lookup column filtering

Unfortunately this lookup column can't be used in the new Key Filters list navigation option. This is where the Term Store based multi select column does work.

Figure 3: Multi-select Term Store column filtering

(Usability note: I think the new metadata navigation area should be at the top of the quick launch otherwise users may not notice they are available if the site has a lot of lists and libraries showing in the Quick Launch. )

So depending on how you want to use the metadata might determine the type of column that will work best.