Let's start with creating an example category.

Press Categories and then New in the top left corner. You will see a page:

Short description:

• Title – enter a name of category
• Alias – enter an alternative name of category or leave it blank
• Parent - select parent category for the new category, if needed
• Tags – assign tags to content items. Tag names must be unique.
• Published – choose yes/no if you want to publish category or not
• Access - choose the access level group that is allowed to see this item
• Permissions - set the permissions for the access level groups
• Language - assign the language to this item, if multilingual site

See an example list of categories: