The characters for yin and yang show us the sunny and dark side of the hill. This is important because there is only one hill.
Yin and yang is very important in Taoist thought. Yin and yang is the original expression of creation. Many polar terms can be seen as yin and yang: male and female, heaven and earth, king and servant, the universe and humanity. In the West, we tend to think of these as opposites, and try to increase one at the expense of the other. We value good over evil, wealth over poverty, winning over losing. In ancient Chinese thought, things were more fluid. Yin and yang were open categories. Accordingly, a tree might wither in autumn, become bare in winter (yin), blossom in spring, and flourish in the summer (yang).
I think this idea is closely related to another: the macrocosm and the microcosm. In English, these words mean the large and small cosmos. The great Tao, 道, is expressed in the te, 德, of the individual.
Taoist alchemy often speaks of reversion, of turning things backward. The explosion of creation gives rise to the 10,000 things, but it also casts them apart. Reversing this process returns us to the original Tao.
One of the main ideas of alchemy is to bring fire below water. Now what does this mean? Fire rises, water descends. If fire is over water, then fire disperses and water is lost. If water is over fire, then the fire heats the water. This is the idea of alchemy.
Where this gets confusing is when one fails to distinguish the level one is speaking.
In one system, yin might refer to the body, and yang to the mind. Often, mind flies out into the world, and the body is forgotten. However, by bringing the mind back into the body, mind and body come together. This is a standard first step in martial arts.
In another system, yin may stand for yuan shen, and yang for shi shen. Shi shen flies out into the world and is lost, where yuan shen is forgotten. By calming shi shen and expanding yuan shen, true attention is stabilized.
A third practicioner may come along and point out that heaven and earth do not refer to these things at all. Rather, heaven refers to the dan tien between the eyes, and earth to the dan tien below the navel. The upper energy flies up and is lost, the lower energy descends and is lost. The idea is to bring the upper energy to the lower, and the lower to the upper. This way, balance and harmony is restored.
Who is right?
The laws of Tao should apply equally to all situations. Accordingly, all of these may be correct in their particular context.