Tag associations let you set up associations between the fandoms, characters, and relationships in your tag set, which then lets your participants pick from only the characters and relationships in a given fandom.
Note: if the wranglers have already set up these associations, then you can just add the additional ones that you would like -- you don't have to (and in fact aren't allowed) to create copies of canonical associations. You can still limit your participants' choices to tags actually in your set.
If you're not sure how this might work, try adding a few fandoms and characters and setting up some associations, and then set up your challenge and try out the sign-up form!