Categories offer a way of organising your FAQs around similar areas. For example you may wish to group some of FAQs into a "pre sales" category and others into a "post sales" category. Or if you sell many different types of product you might want to create categories for each product and categorise your FAQs in this way.
Customers may choose to browse FAQs by category as well as searching.
An FAQ can exist in more than 1 category and you can also create sub categories within categories.