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Categories are just an organizational tool. There is a clearly defined relationship between Sections, Entries, and Fields, but Categories exist on their own. If you look on the Classes page, you'll see that every Resource has the same 6 fundamental properties and 3 of them are ID values. The first is the ID that belongs to the resource itself, the second is the ID of the resource's parent, and the third is the ID of the Category that the resource belongs to (if any). There isn't a strict hierarchy here, how you use categories is entirely up to you. You can create categories, child categories, and careful plan exactly how you want the resources in your system to be organized. Or you can ignore the whole thing completely and just let every resource have the default category of "uncategorized." Many user find that the ability to create hierarchal parent-child relationships with entries, and then filter down results even further by Section, leaves the use of Categories unnecessary. But if you want to use them, it's there.
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