OK. I've done a bit more searching & have found
http://wordpress.org/support/topic/199770?replies=1
from reading the third answer, I'm guessing that I have to edit the widget.php file (I can't right now, as I've not got access to the server from this lappy).
I've also had a look at my old sidebar & from memory, it was this line that I had to do something with:
<?php wp_list_cats('sort_column=name&optioncount=1') ?>
I'm fairly sure that it was something to do with wp_list_cats ... However, though I've had a look at some of the templates I've not edited, they seem to have been updated since I created this one.
So, in essence, do I have to edit this line:
$cat_args = "orderby=name&show_count={$c}&hierarchical={$h}";
(from that post by Daiv) - what do I change, as it's got "Hierarchical" in there - which is what I want! ... or has he altered what's in the file?
Or am I barking in the wrong forest, never mind up the wrong tree?
<?php wp_list_cats('sort_column=name&optioncount=1') ?>