By default, the Categories tab displays the name of the custom object as the only available node (hierarchy level), which you cannot delete or inactivate because it is needed to see other categories.
The tree position of the Root category is the same as the unique code assigned to the system object on the General tab of its object definition.
As you add categories to a custom object, they are added to the Show items in node drop-down list and displayed hierarchically. As in system objects, subcategories are marked by the appropriate indentation in the hierarchy. Children of the root category appear at the same level as the root category.
For example, Claim is the custom object name and root category in the following figure.
Custom Object Categories, as Displayed in End-User Interface