Trouble understanding wp_update_term()

I have a lot of posts and post tags. I am trying to use custom taxonomies as described by Justin Tadlock.

I was thinking I could use wp_update_term( $term_id, $taxonomy, $args ) to change the taxonomy of terms.

I added wp_update_term( 10, 'people' ) to my themes functions.php but nothing is happening. I know I am doing something wrong. Heck, I may even be misunderstanding the purpose of wp_update_term().

Anyone have ideas?