When Buddhism arrived in China, roughly 18 centuries ago, immediately it ran into a language barrier. There were no words in Chinese for much of what the Buddha taught. So, the early Chinese Buddhists borrowed words from Taoism.
The word Tao itself, I understand, refers to a path or a passage. It is sometimes translated into English as "way." But Tao is a word with multiple meanings. Elizabeth Reninger, About.com's guide to Taoism, has a very helpful definition of Tao that says it is the "fundamental principle of all of creation" as well as the path that leads one to encounter this fundamental principle.
In usage, Tao corresponds closely to Dharma, but it was used to stand in for other words as well. Zenkei Shibayama Roshi (1894-1974) wrote in his commentaries to the Mumonkan, an important koan collection, that for a time the Chinese also translated bodhi, prajna, and sunyata as "Tao."
So, it's not surprising the word Tao pops up in a lot of Chinese Buddhist literature, especially that of Chan (Zen). Zen students find it over and over again in koans, for example. In Zen, Tao came to signify a kind of fundamental truth or essence.
I bring this up because I've been looking at a koan called "Ordinary Mind Is the Tao." It's case 19 in the Mumonkan, for anyone who has a translation. I wouldn't presume to provide an "answer" to the koan, because I don't see it perfectly clearly myself, but I want to write a little about what it is asking. But then I read what Shibayama Roshi wrote about Tao and thought that was interesting in itself.
Shibayama Roshi said that the use of Taoist vocabulary had a subtle influence on Chinese Buddhism.
"Although the original meaning of the Chinese word is the same as its Indian equivalents," the Roshi said, "the nuances are naturally different, reflecting their respective cultural backgrounds." Indian Buddhism is more philosophical; Chinese Buddhism is more practical.
Other Zen teachers have been more expansive. Nyogen Senzaki Roshi (1876-1958) said, "Taoism is the mother of Zen, and Dhyana Buddhism is the father."
I noticed some years ago that English speakers tend to borrow Tao and Zen and use them as synonyms. Consider The Tao of Pooh and The Zen of Motorcycle Maintenance. In context, it seems both words mean something like "way," or maybe "wisdom." Strictly speaking, the word Zen is the Japanese rendering of the Sanskrit dhyana, which refers to meditation or an absorbed state of mind, so they aren't synonyms. But maybe the family resemblance is obvious.