Categories are how we recognise, differentiate, group and understand different things.
We do this all the time in our daily lives. For instance we categorise foods into what we like and don't like. We categorise things in our in-tray as urgent, not so urgent, do it tomorrow or forget. We categorise experiences as good or bad.
There are many ways of categorising things.
We can create hierachcical structures for our categories. These are called taxonomies. Or we can create flat single levels of categories - in other words just a list of terms.
The problem with categorisation is that people have different concepts ogf how things should be categorised. For example a child's view of a taxonomy for cars might be Size, Colour, Shape, Speed. An adults might be Fuel economy, Number of Seats, Engine Size and so on.