Ontologies 

In philosophy Ontology is the theory of the nature of existence, of what types of things exist. In the world of the semantic web however this phrase has been adopted to mean a document or file that formally defines the relations among terms. For the web this usually includes a taxonomy and a set of inference rules. DAML is a language created by DARPA as an ontology and inference language based on RDF.

Taxonomy   

"The taxonomy defines classes of objects and relations among them. For example, an address may be defined as a type of location, and city codes may be defined to apply only to locations, and so on. Classes, subclasses and relations among entities are a very powerful tool for Web use. We can express a large number of relations among entities by assigning properties to classes and allowing subclasses to inherit such properties. If city codes must be of type city and cities generally have Web sites, we can discuss the Web site associated with a city code even if no database links a city code directly to a Web site." Scientific America [SC02].

Inference rules

Inference rules supply more power to ontologies. The rules allow the computer not to truly "understand" the information but to manipulate the terms more effectively in ways that would be useful to the user. An ontology is made up of a list of inference rules that Agents can map into and use to communicate.

Uses

There are many ways in which Ontologies can enhance the functioning of the web. For example used in a simple fashion they can vastly improve the reliability and accuracy of search engines. This is done because rather than looking up an ambiguous key word using ontologies would allow the search program to look at only those pages with precise concepts.  More advanced applications can use ontologies to relate information on a page to the associated knowledge structures and inference rules. As a human it is easy to link information on a page to a person and know what each of the links will take you to, a computer however would find it very difficult to make links in this way without ontologies. 

James Hendler said "I predict that in the next few years virtually every company, university, government agency or ad hoc interest group will want their web resources linked to ontological content – because of the many powerful tools that will be available for using it".

                                                                           

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  The Semantic Web by Ben West