Categories are a "closed taxonomy" that you can apply to your documents. By "closed taxonomy" I mean that categories are a hierarchical classification system that can only be updated by an administrator.
For example, you might have divisions and departments in your organization. You could add that structure as a set of categories which would then let people classify their documents according to your organizational structure. Then, when people search, they could say, "I only want to see documents in the 'Asia-Pacific' region".
