The term Feed taxonomy is described in Terms Definitions. In short, this feature allows you to map your Magento categories to category tree provided by given Feed authority. To setup this mapping, you need to navigate Catalog → Manage Categories. Click on a category to open the category detail and choose proper association:
Please note that not all Feed authorities provide category trees, so Taxonomies for all Feed layouts can´t be available.
The taxonomy setup is actually available only on a category level. The setup on a product level is on our roadmap.