If you define both Category Groups and their Categories you will be able to attach multiple 'labels' or 'tags' to your Documents - multiple ways to describe those Documents, possibly many different kinds of ways of describing them - and subsequently you or your site's users will be able to find information using them.
In the Category Groups entry screen you will define the kinds of Categories that will be used - headings that will be used to group together multiple Categories. For example, if when your Documents are ads for Jobs, you should create a Category Group "Skills", and another "Market Sectors ". The individual Categories will then describe the skills and market sectors with which you deal and can be searched on by visitors.
If you are setting up ordinary web pages or intranet pages then you should create Category Groups which describe the structure of your site. These can then be used later on for you to either find and manage them easily or to create site pages or navigation systemsusing the structure you have defined.