Categories are one of the most important modules. Its main purpose is to "categorize" your data so you can easily find. However it doesn't stop there, it's also the backbone for the rights management. The best way to look at it is as a file structure: categories are the directories and any other module item is a file. As with directories, each category can have certain rights (view, add, edit, delete, etc) set to them for itself and it's content. More on this can be found in the rights section.

Another similarity to directories is that a category can have a parent category as well sub-categories. The categories module has a so called "self-reference" which... references itself.