The examples of official tolerance that foreigners will typically recognize are those concerning prostitution* and "soft drugs."
The Dutch acknowledge, officially and with intensive debate, that sometimes eradication of a problem is impractical and for that reason may be an inappropriate objective.
Indeed, the concept of "problem" is a matter subject to interpretation. Predisposed morality colors the debate about the supposed "problems" of paid sex and socially-benign drugs. Predisposed morality is a factor. There are many others and the act of "gedogen" acknowledges this.
A Dutch girlfriend gave me the best definition of "gedogen" that I've heard: "not legal, but not illegal."