I generated the tag cloud in my sidebar using this: http://post-theory.com/tumblr-tag-cloud-javascript
It’s a really easy-to-use little thing, and I was pleased by how it let me customize the appearance of my tag list. You can sort the list alphabetically, by frequency of use or by most recently-used; customize font, size, word wrap, and all sorts of other display elements.
I put a tag cloud on my Tumblr because it provides some basic searchability and archiving function to this site, and I’m very pleased. ^_^