<div id="sidebar">
  <h2 class="category-name">Listing all tags</h2>
    {% for post in site.posts %}
      {% for category in post.categories %}
        {% assign item = category %}

        {% unless tags contains item %}
          {% assign tags = tags | append: ';' | append: item %}
        {% endunless %}
      {% endfor %}
    {% endfor %}

    {% assign list = tags | split: ';' | sort %}
    {% for category in list %}
        <h3 class="tag-name">
          <a href="{{ site.baseurl }}/tags/{{ category | replace: ' ','-' }}"
             title="Articles about {{ category | titleize }}">{{ category | titleize }}</a>
        </h3>
    {% endfor %}
</div>

<div id="sidebar">
  <h2 class="category-name">Listing all tags</h2>
    {% for post in site.posts %}
      {% for category in post.categories %}
        {% assign item = category %}

        {% unless tags contains item %}
          {% assign tags = tags | append: ';' | append: item %}
        {% endunless %}
      {% endfor %}
    {% endfor %}

    {% assign list = tags | split: ';' | sort %}
    {% for category in list %}
        <h3 class="tag-name">
          <a href="{{ site.baseurl }}/tags/{{ category | replace: ' ','-' }}"
             title="Articles about {{ category | titleize | replace: '-',' ' }}">{{ category | titleize  | replace: '-',' ' }}</a>
        </h3>
    {% endfor %}
</div>

Improve category display, remove dashes.
Improve category display, remove dashes.
