Taunts are generally harmless actions that are given to characters in many fighting games, the character strikes a pose that generally serves only to annoy or mock the opponent. Most taunts leave the character wide open to attack, and thus serve no practical purpose. However, there are exceptions:Certain taunts have hitboxes that allow the user to actually hit the opponent with their taunt (ie: Luigi in Smash Bros, Dudley in Street Fighter III, Deadpool in MvC3)Dan Hibiki's Roll Taunt actually acts as a dodge roll, but is usually impractical since it leaves him wide open after useTaunts in the Street Fighter III series will grant the user with character-specific buffs (ie: increased damage, increased stun gauge recovery, increased defense, increased stun damage, etc.)Dan Hibiki's Legendary Taunt is the only Taunt that costs power meter to use but is otherwise the same as a regular taunt; serving no practical purpose, most likely due to Dan's nature as a joke character. The only exception in in Super Street Fighter IV, where it is one of the only moves that can be cancelled into an Ultra combo.Dan Hibiki's Mythical Taunt changes the animations and properties of each of Dan's normal attacks for a limited time. However, since this only transforms each of his normals into Taunts, it serves no real purpose other than humorous effect.Some taunts alter a character's hitboxes for the duration of the taunt, allowing them to be used to dodge certain attacks (ie: El Fuerte & Adon in SSF4)
Allow me to add a few additional tidbits regarding taunts.In the AOF series, taunting decreases an opponent's spirit gauge giving taunts a tactical viability in it.In KOF 99 and 2000, taunting will give you one more use of your striker at the cost of a stock of super meter unless your striker gauge was full.Taunting in certain games will give the opponent a small amount of super meter.(ie: Guilty Gear series, CvS2, SvC Chaos)Some games allow you to cancel your taunt at a certain point of the taunt.
Adding to DarkFlare's third point:In Hokuto no Ken (PS2 game), the taunt gives the enemy a power boost (used for ground and air dashes) and an aura bar.
Some additions...In some games (p.e. SFA 3) you can taunt only once per roundSome characters have more then one taunt, usually done with a joystick direction and tauntSome characters (p.e. Alex, Hugo & Makoto in SF III) can extend the taunt animation by holding the taunt button
