The tag is used to change the cleaning mode of the toothbrush automatically, to match the type of head you inserted. This makes very easy to change heads durring the same session.
It is also used to register how long you used that head. A warning is shown when the head should be replaced. After a few warnings you will no longer get them, just the led to replace the head remains on. You can continue to brush your teeth without any problems. What I've found is that the warning comes at the right time, you really feel a decrease in cleaning efficiency around that time.
You can use heads without the cip and they work. You just have to select the proper mode from the handle manually. Or not.
The early versions have a defect where when you push to insert the head, you also push to open the handle. With time, water will get in and the toothbrush will stop working. Not sure about the latest versions.