This information is given on the main administrative screen: "Easy, just name your category appropriately. For instance, if you
have a category named 'Computers', to have a subcategory
named Hardware just click on Add Category, and name it
'Computers/Hardware'.
You can have as many levels as you like
'Computers/Hardware/Video Cards/Diamond' for instance, but
just make sure you have the appropriate categories before hand
(i.e. in the above example, you would need to have 'Computers',
'Computers/Hardware' and 'Computers/Hardware/Video Cards'
first. "