What is the difference between folders and categories in Outlook
Are you confused on the difference between folders and categories in Outlook.com email? Read this article to find out the differences between a folder and category in Outlook.
Sometime back, Hotmail/Outlook added the Category feature in their web based email service. The "category" option is a bit confusing since they already have a "folder" option and the category feature is very similar to the folder option.
Both Folders and Categories are used to organize your emails in slightly different ways.
Folders in Outlook are very similar to the folders in your computer. Just like you organize your files in one of the folders in your computer, you can organize your emails in one of the folders. An email can belong to one and only one Folder.
Categories in Outlook.com are similar to the labels in Gmail. You can mark each email to be part of one or more categories. For example, consider you receive an email as confirmation of your online purchase. You may want to assign that email to multiple categories like Shopping, Expenses and Credit Card Transactions. That way, you can find this email when you browse through any of the above said categories.Why Outlook need both Folder and Category options
It is quite confusing for the normal users why both Folders and Categories are required. The Categories option is enough to organize the emails and it can do everything the Folders can do. Then, why do Microsoft still offer the Folder option? It is probably for backward compatibility since most users have already created many folders and Hotmail failed to automatically convert them to Categories when that feature was introduced.
The only difference between Folders and Categories is, each email can be part of multiple categories but can belong to only one folder. Also, folders allow sub folders but categories do not allow sub categories.
Categories are just flat structure and you cannot nest them or organize in a hierarchical manner, which make it an inferior option compared to the Labels option in Gmail. On the other hand, the Folders allow hierarchical structure and you can create sub folders for each folder.
The Labels option in Gmail comes with a lot more flexibility and options including Archive option, hierarchical structure, color coded labels, show/hide from quick view and so on.How to organize Outlook.com emails in Folders
To organize emails under any specific folder, follow the steps below:
1. Open the email
2. Click on the down arrow next to the label "Move To" on the top of your email.
3. Choose a Folder from the list of folders and click on it to move the email to that folder.
If you like to create sub folders under any folder, right click on the folder name on the left panel and select "New Subfolder".How to organize emails in to Categories
The process to organize emails into categories is very similar to what you do with Folders.
1. Open the email
2. Click on the down arrow next to the label "Categories" on the top of your email.
3. Choose one or more categories from the list and check the checkboxes to choose the labels/categories you want to apply for the selected emails.
Follow 
Is there a way to ensure emails assigned to specific categories can be automatically moved to certain folders? For example, I have a Category titled "Actions" and an "Actions" folder under my Inbox folder. If I categorize an email under "Actions" is there a way to ensure it is automatically moved to the corresponding folder?