Categories are great for segmenting your content and will also allow readers to filter your content based on the categories you created. Articles/posts can be assigned to multiple categories.
To add a blog article/post into categories, go into the post settings menu and click the '+' button in the 'Categories' menu. Then type or select your categories and save.
You can display the categories in your sidebar (or anywhere else on your site) by using the Blog widget. Here's how...