Products are categorized and identified by as many as four layers of search criteria: category, secondary category, keywords, and product. The more products you carry, the more search options you should offer to help your customer narrow down what he/she is looking for.
Under the Main Categories tab on the Admin menu, you may add an unlimited number of categories, edit existing categories, or delete/archive existing categories. The category list determines the choices available to the customer when searching your site, and the choices you have when assigning a category to a product.
Categories are your "top level" search filter. Products may be associated with more than one category. However, if you have products that seem to fit in more than one category, take time to rethink how you have categorized them. A category should be broad enough to cover everything associated with it. Think of it like a department store, where products would be placed in broad categories such as houseware, clothing, jewelry, and so forth.
The Sort Order field allows you to "force" the order in which the categories are sorted, rather than relying on alphabetical sorting. Categories are first sorted by the numeric sort order, and then any categories that have the same sort order are sorted alphabetically.
If you want to no longer use one of these categories, you can "archive" it, which will remove it from view on the web without actually deleting it from the store. Products can still be assigned to archived categories.
You can choose to relate main categories with secondary categories using Store Settings > Display Settings. However, the relations are automatically determined at the product level. For example, if you create a product with "Clothing" as a main category, and "Men's" as a secondary, "Clothing" and "Men's" will now be related.
Secondary categories act as subcategories, but they can be searched directly without an associated main category. A product can be related to an unlimited number of secondary categories.
The Sort Order field allows you to "force" the order in which the secondary categories are sorted, rather than relying on alphabetical sorting. Secondary categories are first sorted by the numeric sort order, and then any categories that have the same sort order are sorted alphabetically.
The real power lies in the flexibility with which products can be searched. For example, customers can narrow or refine a search using secondary categories by searching for "Clothing" (category) and "Men's" (secondary category). In this way the secondary category acts like a traditional subcategory. But because there is no direct relationship between categories and secondary categories, customers can easily widen their search by searching for just "Men's" (secondary category only). The results will contain all products with a relationship to the Men's secondary category, regardless of what main category they are in, such as Shoes or Shirts.
You can choose to relate main categories with secondary categories using Store Settings > Display Settings. However, the relations are automatically determined at the product level. For example, if you create a product with "Clothing" as a main category, and "Men's" as a secondary, "Clothing" and "Men's" will now be related.