From your WordPress Dashboard, select Ideas > Idea Categories to manage idea categorization. This works the exact same as WordPress categories except that they only apply to ideas created. They can only be added, changed or removed by Authors on the front-end and by Administrators on the front-end or back-end. If the text of a category is changed, all ideas created that use that category will also be updated. Upon installation, the plugin creates the category Uncategorized and sets that as the default.
Categories are usually employed at a higher level than tags so that both users and hosting company get another dimension of attributes on their ideas. Typically a category would represent a product, service, division of a company, division of labor, and so on. However, there are no limitations on what you can do with them and their importance to the way the business, product or service works is what should really drive how they are defined and used.
Note: The default idea category can't be changed, although it can be renamed. In the premium version this can be changed to any existing category.