where do you edit wp_list_categories??

I’m trying to do some changes to my categories and I’m pretty confused where to edit wp_list_categories. Is this suppose to be introduced into a file, or does it already exist somewhere? I read the codex pages and understand how to edit the parameters, but getting to the wp_list_categories to do the edits is what’s confusing. From what I’m reading it’s in my theme folder somewhere??

Thanks in advance.