Event categories are the available event types you can choose from when creating events within your site.
 

Navigate to the Master Calendar page, and click the link "categories"

You'll find the "categories" link in the top right hand corner of the screen with the other quicklinks for the page.

Edit, add or delete categories

You'll find a link just below the page title to "add term"

You can edit terms by clicking the links on the right, and you can delete them on the edit page for each term.

You can rearrange terms by dragging and dropping them into a different order using the cross-arrows on the left hand side. Be sure to save your changes using the button at the bottom of the page. Changing the order of the terms here will change the order that they appear in on any lists where the terms are used (mostly on setup pages).

Colour code your events on the calendar view

Events types can be colour coded on the edit page for each term. This colour coding only appears on the calendar view. The calendar view is a tab available on the "Master Calendar" page.