This is usually translated as the Way. But it's hard to say exactly what this means. The Tao is the ultimate creative principle of the universe. All things are unified and connected in The Tao. Taoism is a religion of unity and opposites; Yin and Yang. The principle of Yin Yang sees the world as filled with complementary forces - action and non-action, light and dark, hot and cold, and so on.3
The common view of Daoism is that it encourages people to live with detachment and calm, resting in non-action and smiling at the vicissitudes of the world. Contrary to this common view, Daoists through the ages have developed various forms of community and proposed numerous sets of behavioral guidelines and texts on ethical considerations. Beyond the ancient philosophers, who are well-known for the moral dimension of their teachings, religious Daoist rules cover both ethics, i.e., the personal values of the individual, and morality, i.e., the communal norms and social values of the organization. They range from basic moral rules against killing, stealing, lying, and sexual misconduct through suggestions for altruistic thinking and models of social interaction to behavioral details on how to bow, eat, and wash, as well as to the unfolding of universal ethics that teach people to think like the Dao itself. About eighty texts in the Daoist canon and its supplements describe such guidelines and present the ethical and communal principles of the Daoist religion. They document just to what degree Daoist realization is based on how one lives one's life in interaction with the community-family, religious group, monastery, state, and cosmos. Ethics and morality, as well as the creation of community, emerge as central in the Daoist religion.
Livia Kohn, Cosmos and Community
Taoist ethics are concerned less with doing good acts than becoming a good person who lives in harmony with all things and people.4 Taoist ethics are inseparable from Taoist spirituality - both contain the same ideas. If a Taoist wants to live well they should take all their decisions in the context of the Tao, trying to see what will fit best with the natural order of things. Taoists thus always do what is required by events and their context, but they only do what is required, no more.
But what is required may be a lot less than modern Westerners think:
From the perspective of classical Taoism, Western humanism makes the mistake of assuming that the ability to intervene in life's events translates into a moral duty to do so.
The constant and unmistakable teaching of the Tao Te Ching is that humans are indeed capable of intervening in life's events, but the evidence of life, which humans constantly ignore, is that such intervention is destructive to all involved, and that we therefore have a moral duty to refrain from taking such actions.
Russell Kirkland, Responsible non-action in a natural world
So, in theory at least, Taoists tend not to initiate action - but wait for events to make action necessary - and avoid letting their own desires and compulsions push them into doing things. In practice Taoism recommends the same sorts of moral behavior to its followers as other religions. It disapproves of killing, stealing