To add a new category to your store, you must create a product for that category. You cannot create categories without having products within them. When you add a product, add your new category in the Category field, in the top right corner of the product editing page. Your product will automatically be categorized under the new category you added.
You can also add subcategories within your categories. To do so, click the arrow on the left hand side of the category. Click the blue Create a subcategory link and add your subcategory.
Edit Category Names
To edit your existing categories and subcategories, hover over an existing product and click Edit Details under the Options dropdown menu. On the product editing page, hover over the category or subcategory name you'd like to edit and click Edit. You can now type your new name and hit ENTER on your keyboard to save it.
To change the order of your categories and subcategories, hover over an existing product and click Edit Details under the Options dropdown menu. On the product editing page, hover over the category you want to move and click the icon between the word "Edit" and the trash can icon. This will enable you to drag and drop your category to its new position.