Sector-Paint Tool - "Name Layer"

This may be the simplest question in the world, but I'm just not finding an answer anywhere.

I was just reading one of the modding guides about it and I'm definitely missing something. I have no experience in modding or coding anything before this, so it really is diving in at the deep end with lead shoes!

This is what I was reading:
http://ift.tt/2vwLAfo

And I can't get the Name Layer to work correctly. If I give it a name, it won't show up in-game. If I add something in the Tag box it shows up but also with the "Tag Not Found" error... why?

The guide says this:
"Localization Tag is as the name says a tagbased name which means that the tag put in here needs to get a text related through the localization (text) files in the mod. Otherwise the game will show Tag not found: tagname in the game."

However I have no idea how to do that. I checked out some other mods that were using localization stuff for other languages, but they didn't explain how I could JUST make the name appear. Do I need to save a special text file with these area names in a specific folder?

Thanks in advance, you'll likely see more questions from me as I pull what little hair I have left out trying to get the simplest things done.

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Sector-Paint Tool - "Name Layer"