The PARAM tag is primarily designed to store data that was sent from the previous page or entered by the customer. For example, at the top of almost every ILLiad web page, there is HTML to store the SessionID, TransactionNumber and Username.
These values were set on previous pages (when the customer first logged in or clicked on a specific request) and may be used on subsequent pages.
PARAM tags also are used to store the data that a web user typed on the form. The registration, change user information and all request forms have many PARAM tags on them to store the data entered by the customer.
This is different from what data may already be in the database. For example, if you require that phone numbers contain an area code (using the WebValidation table in the Customization Manager) and your customer currently has a phone number of 757-467-7872 but attempts to change it to 867-5309, the change user form will redisplay with an error tag and status at the top explaining the format necessary for the Phone field, but the value the customer typed in will remain as 867-5309 on the form for the customer to correct.
Once that value is corrected and has passed the WebValidation, the new phone number of 757-867-5309 is stored in the Phone field of the Users table. An example of how this tag would display in the HTML:
<input id="Phone" name="Phone" type="text" size="40" class="f-name" tabindex="3" value="<#PARAM name="Phone">">
Note that the PARAM tag matches the name for the input edit box. That name is usually the same as the field in the table, but may be different in the case of inputs like DeliveryGroup, WebNofiticationGroup, etc.