iTunes has 16 main categories and 51 subcategories to choose from for your podcast. These categories are included in your show's RSS feed and help listeners find new shows through search and in recommended lists (Apple also populates top podcast lists by category in addition to overall).
To designate your podcast's categories, you can do so either when create a new podcast or editing an existing. The field in Megaphone is called Podcast Category and pulls from the categories and subcategories accepted by Apple.
Visit this link to see a full list of all categories and subcategories.