Yes, in the latest update activation is recommended, not mandatory.

This feature is complete. It’s called Tag Suggestions and automatically suggests tags when you send email without any tags. It can also be invoked at any time on any Outlook items.

We wrote something related at the Taglocity Blog here (and is too long to repeat in this little box):

http://blog.taglocity.com/blog/bid/6668/You-Don-t-Have-To-Tag

Thanks for the suggestion.