The website recommends books by knowing which books are similar to other books. If you ask for books that are similar to a particular book it looks at how people have tagged it and finds books that share similar sets of tags. It doesn't care whether a book is good or bad - just books that are considered by The Institute For Impure Science (IFIS) folk to be similar to other books.
This means that the system is at it's most useful when people are adding tags to books they like. You can add a tag to a book based on which series it belongs to, or genre or some feature it might have (ie it's a book about dragons). You can add the tag to another book and in doing so tell the website that you consider the two books are similar because they share that quality as defined by the tag. If you don't like a book, don't tag it. Books without tags won't get recommended.
It's also worth mentioning that rarity of a tag is a factor that is considered when comparing how similar two books are. If you simply have one set of the books you like, then this set will still result in the website making recommendations - but the recommendations will score much less than someone who has made different sets for different genres, or for books he finds similar.