An exploration of the Manage>Categories feature
The categories menu will display.
1. This is the name of the Category
2. Category Parents are used if you have sub-categories. For example, a Parent Category could be "Media" while a sub-categories of that parent could be "Radio", "Television", and "Print". (Cateogories are best kept pretty general, though. To micro-organize your blog, instead of using sub-categories which have a parent you may want to have all parent categories and use Tags. See the documentation for Tags.)
3. The Description will appear when a reader mouses over the Category title in the sidebar (you can add the sidebar widget for Cateogories in Design>Widgets)
4. Click Add Category to finish
1. Category Name, (description, and post count appear to the right)
Change the info you'd like and then click Edit Cateogry
You will then exit Manage>Categories and be taken to Manage>Posts
You will see that you can also Add a New Cateogry on the fly right in the Post Editor as well.
Add as many categories as you'd like and go back through exisitng posts and categorize them. Using categories while adding the "Categories" widget to your sidebar will help readers find the information they want by topic.