Think of categories as a way to organize your workspace pages. They live on the left hand side of the site at all times, and by clicking through them you can quickly access different workspace pages. Within categories you can create subcategories to add an extra layer of organization. By clicking on categories and subcategories, you can see a preview of the content within each folder. You can also click "Browse category" to see all workspace pages in a category.
The category a workspace page is filed under is also shown on the right side of each workspace page. If you have ownership access for a workspace page, you can edit by hovering over the area off to the right of the heading "Workspace Category", and clicking the word "Edit".
You can then select which category and subcategory you would like to file your workspace page in, and hit save.
You can easily edit Categories and Subcategories under the admin tab - both from the main tab view, or by clicking "Site setup", then "Workspace categories".
Under the "Workspace categories" section of the Admin tab, you can add new categories, as well as rename and delete existing categories and subcategories.
Categories and subcategories are a great way to organize your work in a way that makes sense for your organization!