Taoism contains many profound theories which at first may be difficult to understand. In general, these theories reflect Taoism as a balanced relationship between human beings and nature.

The most basic concept of this religion is Tao. Originally, Tao refers to the road extending in one direction. Roads having many forks or directions are not Tao in Taoists' opinions. Tao also refers to the rules governing the behaviors of humn beings and objects. For example the sun, earth, moon and other celestial bodies run along certain tracks. Laozi, the founder of Taoism, added his unique idea on Tao and made Tao as the core of his theology. In his opinion, Tao is a whole existing before the heaven and earth. Everything is the deviation of Tao. Laozi's Taoist theory contains dialectic thoughts, such as his consideration of the law of Tao to pertain to the opposites of human beings, concepts, and objects. For example, high and low, big and small, long and short, these opposite pairs exist on the condition of each other. Misfortune can also transform into fortune under certain situations. Another example is that there is no eternal weakness or hardness. Laozi used water as an example to support this thought. On the one hand water may be seen as the weakest thing in the world, but on the other, it can destroy the hardest thing such as a rock.

In order to make this theory more clear and vivid, Taoism draws a Taiji Diagram: a curve dividing a circle into two parts, one half is in white representing Yang (the bright side), while the other is in black, representing Yin (the dark side). There is a black dot in the white part, while a white dot is in the black part representing the Yin and Yang of each other and can transform into the counterpart. The diagram looks like two fish end to end, so it is also called the Diagram of Yin Yang Fish.

Qi, another concept, makes reference to the whole world and the foundation of the unity of the world. It is the basic source of any tangible and intangible objects, including Gods and spirits, as well as humans and ghosts. The vital essence of Qi is called Jing (genuine energy), which is believed to be necessary in order to create anything when arranged in certain ways. Jing, Qi and Shen (Spirit) are considered to be the three most important elements in human beings.

Taoism wants peace and stability like many other religions. The early Taiping Classic (Peace Classic) expressed Taoists' own understanding on peace. Taoism thinks that people must perform according to inherent rules in order to establish a harmonious and orderly world where everyone is equal and kind to each other. Along with this is the belief that there should be a world without wars, since it appears that wars bring people nothing but disaster and suffering. This religion is always against wars and weapons which thought to be inauspicious. Besides, a peaceful society also enables people to live harmoniously with nature, and to also protect nature instead of destroying it.

Moreover, Taoism performs non-action and non-intention in order to purify the soul. Rules should better simplify the government affair to reduce the disturbance of political measures to society and common people. These and other Taoist ideas are very useful to the present society, and a peaceful and harmonious society will come if these principles are well acted out.