Show Sub-categories with Hover "CSS"

http://codex.wordpress.org/Template_Tags/wp_list_categories

wp_list_categories() should output a nested unordered list as long as the ‘hierarchical’ parameter is ‘true’;

styling the unordered list as dropdown is a css problem and not a wordpress problem.

websearch for ‘css style unordered list horizontal dropdown’ should get you links to online instructions.

if you post a link to your site with the problem, someone might have a look at it and might be able to check why it is not working.

it might also help if you could paste the full code of the template with the category navigation into a http://pastebin.com/ and post the link to it here.