Categorization is the process in which ideas and objects are recognized, differentiated and understood. Categorization implies that objects are grouped into categories, usually for some specific purpose. Ideally, a category illuminates a relationship between the subjects and objects of knowledge. Categorization is fundamental in language, prediction, inference, decision making and in all kinds of environmental interaction.
There are many categorization theories and techniques. In a broader historical view, however, three general approaches to categorization may be identified:
Classical categorization
Conceptual clustering
Prototype theory
Source: http://en.wikipedia.org/wiki/Categorization

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