This means that your website visitors will see the menu elements you categorised.
To create a submenu:
1.) Click on "Menu" => "Create Menu Element" => "Submenu".
2.) At "Menu" => "Manage Menu Elements", you can move the menu items into a submenu by clicking on the button with the folder icon to the right of the menu item.
This means only you can see categories, they are not publicly visible on your website (in contrast to submenus). Categories are useful to categorise your pages into different topics.
To create a category:
1.) Click on "Pages" => "Add Category".
Manage categories: To delete a category or to change the title of a category click the appropriate icon.
2.) At "Pages" => "Manage pages" you can move the pages into your newly created category by clicking on the folder button on the right of the page.