You can create Categories and Sub Categories under which to assign Products in your shopping cart.  You can access the Categories feature through Products --> Categories in the menu on the left.

Most commonly, categories are used to categorize your products to make it easier for your customer to find the specific product(s) they're looking for.  

For example, a Category of "Shirts" can list all products that are shirts.  A Category of "Pants" could list all products that include pants.  

In addition, you can add a Sub Category of "Shorts" under the Pants Category since they're related (see below), making it easier for your customers to find the product(s) they're looking for.

System Setup View:

Shopping Cart View:

Additionally, within each category created, you will have options to Save, Assign, View, or Delete your Categories through the tools to the right of your categories: 

Once a Category is created, it will be available within each Product's edit screen as an option to be assigned to your product.  Simply click the dropdown under "Category" and select the desired category to attach your product to: