Categories are shelves for your memory work — "Scripture", "Poems", "Cycle 3". Each item sits on one shelf, or on none, and the list groups items under their category.
Put an item in a category
Open an item's form with Edit, or start a new one.
Under Category, pick a shelf, or choose New category… to make one.
Select Save.
Names ignore capitals, so "Scripture" and "scripture" count as the same shelf. That keeps you from ending up with two that look alike.
Rename and reorder shelves
Select Categories at the top of the memory-work list.
Rename a shelf with Rename.
Change the order with each shelf's up and down arrows. The list follows the same order.
Select Done when you're finished.
Delete a category
There are two ways to delete, and they are deliberately separate:
Delete category only removes the shelf and keeps every item. They move to the group with no category.
The button that deletes the category and its items removes everything on the shelf, with its facts, quizzes and who it was assigned to.
The second can't be undone. It shows exactly what will go, then asks you to type the category's name before Delete category and items.