There is no way to create new albums or to tag faces in Photos. It will tag Places for you, but not people, and it won’t let you create albums. It becomes very frustrating to see the ability to select different albums, but to have no way of creating albums.
Unfortunately, it’s necessary to go back to iPhoto on the Mac to get this accomplished. If you plug in your device, either the iPad or iPhone, through the USB, you can then sync your photos through iPhoto, sending the photos from the device to your computer. Once they’re uploaded, you can move through your photos and do any editing, such as rotating, cropping, red-eye, and even tagging names to the faces.

After the photos are edited, you can go about putting them into albums. You can create new albums there in iPhoto, name them whatever you would like, then copy the photos into the appropriate folders.

Once you have everything edited and organized the way you would like it in iPhoto, open up iTunes and find your device listed in the list on the left. Highlight the name of the device, then find the tabs along the top, and click on the one that says Photos. Check the option that says to Sync Photos, and highlight iPhoto.  Instead of having the option for “All photos” checked, check the option for Selected albums, and click the albums you want to show up on your iPad or iPhoto.

Once the device is synced, it will have the photos reorganized into folders. It keeps your tagging, and now gives you subfolders of pictures organized by people, as well as locations. It also keeps your original camera roll, and a folder, of the all your folders combined. Now that you have everything backed up, and have copied over the ones you wanted, you can delete the pictures in the Camera Roll folder to make room for new ones that you will take. The downside to this is that to get pictures into the albums, you have to always sync back to iPhoto.

Apple is starting to realize the error of their ways, as on devices that are so seemingly revolutionary, it shouldn’t take all these steps and going back to the Mac to get the photos organized. When iOS 5 is released in the fall of 2012, it’s supposed to finally be addressing this. Editing and creating albums will be available on the devices themselves, instead of having to go through the Mac to achieve it, and iCloud will make all the albums sync on on their own.