Categories allow you to organize your WordPress Posts better.
A post should belong to only a single category, all though categories could have hundreds, if not thousands of posts. This is because a post is put into a narrow field about what it is about. This is a category.
Think of it like a filing cabinet. You can put a a piece of paper in a single file folder, in a single draw, of a single cabinet. It defines what that paper is about. (Taxes > 2010 > Personal > John Smith – for example.)
Clicking on the Categories link, under the Posts menu, allows you to add and edit your categories.
You must have at least one category. This is created when you installed WordPress. By default it is called uncategorized. If you change it’s name, it will still exist, and if you fail to add a category for a post, it will get this initial category that WordPress created for you.
Adding a Category
The page is split into two sections. On the left a place for you to add new categories. It includes the name, the slug, and the description.
The name is a person friendly name that you and I will see. You can include any type-able character in the name.
The slug is a URL friendly name. This will be in the URL if your permalink uses categories. You can include letters (upper and lower case), numbers, and dashes (hyphens). You cannot include spaces or special characters, as these do not translate well into URLs.
The description is mainly for you. Although, in some themes, they will let the person see a description of the category if you click on the category name to see an archive of all of the posts under a category.
Additionally, you can define a parent, so you could show sub categories. Consider a newspaper that has a Sports section. You could define sub categories like Basketball, Baseball, and Football. Each of these is a sport, but they are not really related to one another, so you don’t want to necessarily list all of those articles under sports. This just gives you a better way to organize your posts.
Editing an Existing Category
To edit a category, click on it from the existing category name list. It will then bring up the category information in a new page. It is the same information that exists on a new category form. Update the information and save the category changes. This will return you to the main category page.