Home > Setup (Content) > Product Groups > Categories
To assign a product to a category, open that product under Products > Manage Products, open the product in the grid view and click on the Mappings tab. Check the boxes next to the Categories you'd like the product to appear in and click Save.
By default, sub-categories will display in a list near the top of the parent category page as shown below:
Optionally, sub-categories can be displayed in a grid with images by changing the Setting ShowSubCatsInGrid to Yes.
Once this is set, the sub-category list will be replaced with a grid with sub-category images as shown below: