Hi,

If you want to add category kindly follow the below steps:
Go to Admin --> Catalog --> Manage Categories --> Select Default category and then click Add Subcategory, Also note that root category does't show in front, its used for multi store view.

Thanks,
Prabhakar

Manage Categories --> Select Default category and then click Add Subcategory, Also note that root category does't show in front, its used for multi store view.

These are the General Information settings for the category. From the 3 other tabs available you can also manage:

Display Settings - here you can set category Display Mode, its CMS block, whether it is Anchor (i.e. whether or not it should inherit the products in its subcategories) and the product listing sorting options;
Custom Design - from this tab you can select the design for this category, as well as its layout;
Category Products - this tab allows you to add existing products to the category

When you are done with your new category, click Save to create it.