To create categories it takes only a few simple lines of code, but in the end it adds a good amount of usability and organization to any wiki.
Categories help greatly to keep the wiki organized as well as providing pre-generated indexes for the various pages in a category, this basically makes a "master page" of all the items in that category sorted by name, which is great for a quick search through all related items in a wiki.
For example, let's say we are adding some pages for various swords, by simply adding the Sword category to the bottom of the page, we are adding the item to the Sword index generated by the wiki, which makes it incredibly easy for a user to search for all swords at once to locate another related item instead of searching for it directly.
To accomplish the example in this case we need only add the following code to the bottom of the previously mentioned quest item page:
[[Category:Sword]]
Using the example above you should be able to categorize your entries into the wiki (within reason) where the items can be grouped. By default category is generally singular, but if there's a reason to make it plural, do so. For example "Gauntlets." For most things there's probably already a category (List of Categories). If you make a new one, add it to the list so others will know to use it too.
Basically any item that will likely belong to a group of items that will have multiple entries in the wiki, if you're adding something that likely has a lot of related or similar items you should consider if creating a category for it would be helpful / necessary. Don't be afraid to try out categories, if something becomes redundant or unnecessary it is much easier to clean up useless categories then to sort through tons of related entries and categorize them after the fact.
Subcategories
When an item can belong to more than one category it can either have all of the categories explicitly listed, or where it makes sense it can only be listed as a member of a subcategory. For example, a Virindi Executor is both a Creature and a Virindi and it has both listed on its page. However for somethings it makes sense to just list the subcategory. For example there are lots of developer chat pages, these are in the category Developer Chat, which is a subcategory of Turbine. This means that on the Turbine category page all of the dev chat entries are consolidated in a link to the dev chat subcategory instead of all being listed (and competing for space with all the other Turbine items). They are not listed individually because they do not themselves have the Turbine category tag, only Developer Chat.
A category becomes a subcategory by placing a new category tag on the category page itself. For example, if you go to Category:Sword you will see a tag for Category:Weapon. And if you go to Category:Weapon you will see Category:Sword listed as a subcategory.
The category hierarchies can be seen in the tree listing here.