To add a category to your top level content, go to Knowledge Base > Articles and click Add Category in the First Level Content column. You can choose between a variety of category types which change how the landing page, or URL, for the category is displayed.
Choose Quick Add to create the category and return to Knowledge Base > articles to add more content. Choose Add and Edit to go to the category editor.
To add a sub-category, first click on the top level category where you want to add the sub-category, click Add Sub-Category, and continue the category creation process.