The short of it is that Categories exist in Functionly to allow you to quickly identify and contextualize the teams under them.
The longer version is that they can be used to identify teams based on geography, or if you're working with pods or squads then you can use them to group those teams together, so that they can be quickly identified in your org chart.
If you have teams that work independent of each other but are part of the same working group, like sales and customer success, then you might use them to identify these groups.
Want to know how to add or remove Categories?
Are you using categories in a way that we haven't thought about, if so we'd love to hear more?