The categories shown on the homepage are arranged hierarchically. This means that the child categories are under their respective parent categories. This allows the user to search appropriately and easily through the categories.
Directory theme allows any number of child categories for each category. Also the child category can each have their own child categories. For a website with number of categories, if these categories are not presented in an organized manner, they may seem confusing to the users. Therefore, hierarchical categories allow the users the ease to search through categories.
Hierarchical categories in the homepage
Suppose there is a local Directory for Paris city that has listings for parks, hotels, theaters, museums, and schools of the city. The Hotels have sub-categories like Italian hotel, Indian cuisine, Thai food palaces, etc. A user comes to your site and wants to search for a restaurant. So he can directly go to the hotels category and search for the select the sub-category very easily.