Term SetsTerm Sets allow users to create a collection of terms they can reuse to associate with content.Usually the Site Owner creates the Term Sets for all the other users.An example of a Term Set is Programming Languages with values like:
Term Store Management ToolFor site collections we can use the Term Store Management Tool. This is available from Site Actions > Site Settings > Term Store Management Tool.Closed Term SetsBy default Term Sets are closed. Here the term manager must create the terms and users will need to use it. There is no provision to add new terms on the fly.The Term Association dialog is shown below.Open Term SetsOpen Term Sets allow users to create more terms on the fly.Once we mark the same Term Set as Open, we can add new terms in the association time.Selecting a parent term and clicking Add New Item allows us to create a new term under the parent.Groups, Term Sets and TermsPlease note that there is a subtle difference among Groups, Term Sets and Terms. You can see the icons for them.Referenceshttp://technet.microsoft.com/en-us/library/ee519604(v=office.15).aspxSummaryThis article explored Open and Closed Term sets of SharePoint 2013.