The MD series of Rokkor lenses was introduced with the XD camera to utilize its shutter priority setting. The tab indicates to the camera the lens' minimum aperture - f16, f22 or f32 - and that, indeed, an MD lens is attached.
Generally speaking, the Generation I MD lenses were MC lenses with the addition of the tab, and some say improved coatings representing advances of the day in coating technology. The second generation MD lenses were redesigned to be lighter, in keeping with the light weight of the XD. The tapered barrel form and the reduction of the filter diameter from 55mm to 49mm on some lenses are representative of this design change. Also, more use of plastic in the lens' construction was utilized, both to reduce weight and for cost savings.
When the X-700 was introduced, with its full program mode, the Generation III MD lenses were offered. These featured the aperture lock switch. The lens is set to its minimum aperture and locked there so that the aperture ring can't be accidentally shifted when the camera is in auto. Focus and shoot! This was cutting-edge technology for interchangeable-lens cameras in its day. The Gen III lenses also lost the Rokkor marque and became plain MD lenses - most of them became much lighter than earlier models with increasing use of plastics, and many of the zooms introduced at that time became variable-aperture as the camera would fully compensate throughout the zoom range.
The XD has a "stealth" program mode that, at first, wasn't publicized much. In shutter-priority mode, if the camera can't expose properly at the chosen shutter speed, it will change the shutter speed accordingly. The lens has to be set at minimum aperture when the camera is in shutter priority mode so the MD tab can tell the camera the lens' minimum aperture. The MC tab keeps track of maximum aperture. If you prefer this not to happen, the camera can be switched to M mode - it still meters and will lock in your settings.
Later model XD cameras colored the 1/125 setting on the speed dial green, the S indication on the mode switch green and the MD lenses always had the minimum aperture colored green. An insert started being included in the camera manual that hinted at program mode - it said "Green for Go" - set everything on green and shoot away, the camera would take care of the rest.
BTW - The XD doesn't require the MD tab to operate, MC lenses work fine. You just can't use the S mode. Aperture Priority and Manual work fine. The X-700 doesn't require the Gen III lenses - the switch was added so that folks that used the camera most of the time in Program mode could leave the lenses locked at minimum aperture, avoiding bad exposures due to the aperture ring not being in the proper position. The X-700 also works fine with MC lenses but, like the XD, some auto functionality is lost.
MD lenses are backwards-compatible clear back through the SRT era, including the XG and XE - the MD tab was designed not to interfere with the SR mount. I'm not sure about the pre meter-coupled (MC) era.