Categories are used to help customers find similar products within the same category. Showing customers different products within a category lets your customers compare the differences between your products to make an informed purchasing decision.
To add a category to your product go to the menu Products > View Products > Click on the pencil icon of the product you wish to edit. Click on the tab Connect.
Scroll down to the section called Categories and select a category (to add a category click in the category field and a dropdown list of available categories will appear. Save your product. (note: you must first have categories added in your store)