When adding questions to an assignment, the question categories are used to further filter the base set of Available Questions from your selected question source.
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::Question Cateogry Filters::/sites/dl/free/0000065899/564496/ss_QuestionCategories.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif">Question Cateogry Filters (14.0K)</a>Question Cateogry Filters
To view options for each question category, click the reveal icon [REVEAL ICON HERE]. Checking a box next to any of the available question categories options will update the Add Questions list and also display the number of questions that match the checked category. 
There are a variety of question categories you can filter questions by and the categories will vary depending on the source selected.