Project categories are useful for:
Capturing custom information for a project.
Organizing projects just as you use folders to organize documents.
Reporting on similar type of projects to analyze revenue, profitability and other information.
For example, a software development firm may have categories like "New Website", "Redesign Website", "Custom Software Development" etc. For the "New Website" project they may have custom fields like "Who provides the content", "Sites they like" and so on while the "Custom Software Development" may have fields like "Preferred Technology" and "Browsers to be supported".