Man exists sort of suspended between two realms of being; the physical realm, and the metaphysical realm. We might label these the material realm and the divine realm. The divine realm being the realm of meaning and purpose, and the physical realm being the expression of that meaning and purpose.
But in such a halfway state, man is not fully aware or either, even though we are partially aware of both. So we do not know our purpose, and we therefor do not know 'how to be'.
To resolve this conundrum, Taoism asserts that we can fulfill our purpose, nevertheless, by aligning ourselves with the 'flow of being', or the 'way existence exists'. The word Tao refers to this way, or flow. That through the practice of honesty, humility, and spontaneity, we can fulfill the nature of our own being. And therefor the purpose of our being (without having to know it).
"Inaction" is a term used to refer to that alignment with the flow of 'what is', as opposed to our constantly trying to bend or alter or stem that flow to gain our own determined state of being.