How to use Categories Widget
1. Go to Dashboard > Pages > Add New
2. Type title name in title field ( Eg: Categories )
3. Enter the title of your categories widget.
4. Like Archives widget, Categories widget also displays an unordered list of links. Similar to Archives, you can choose to display as Dropdown, give hint about no. of posts in each category. In addition to that, unlike Tags, categories are hierarchical, so you can choose to display its hierarchical order.
5. Click on Done when you're done.