There are three methods to categorize products.
By using the "categorize products" option in the Merchant Control Panel, you select the category you wish to place products in, and then search for a group or all products to list. This results will list all products that meet the criteria you selected with checkboxes to indicate which products will belong to this specified category.
The second method is after adding, or editing a specific product, the completion screen will include a link to "categories" in which you can pick one or more categories this product will belong to.
The third method is to import a comma or tabbed delimited file with the categorizations. The format for the category_products file is simply:
category_ID,product_ID
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