What are “Categories”?

I am getting familiar with WordPress themes. For my theme under “general options” we are to select a “blog category” – but in the drop down it only offers “Uncategorized (1).” I have a “feature slider” component (may be only with the particular theme I am using) – it also requests a category to be featured, but again only offers “Uncategorized (1).”

In the WordPress “Codex” section it discusses a lot, and mentioning the use of categories, but I have not found any introduction to what they actually are or how to get started when you have none.

Any explanation would be very useful as I continue to read. Thx!