Using categories and tags in WordPress
“If you’re running a blog and are using 30 categories, it’s time to either evaluate your content organization (are you shoving squares into circles?), or your blog itself. It’s quite possible that the WordPress categories you’re using for your blog are a direction reflection of a lack of focus in what you’re writing about, and Google makes it a lot harder for sites with scattered content to rise to the top.”
Read more about how to use categories and tags in WordPress.