Hi,
Content in BO enterprise can be organized into folders and categories.
Folders are the primary method of oraganizing content.
Every report or document must reside in a folder.
Areport or document can only reside in one folder. Object level rights are either set explicitly for the object or inherited from the folder in which the object resides.
The difference between folders and categories is that a docuemnt always resides in a folder as storage location, but it may or may not be assigned to a category as a method of classificaton.
Category rights do not inherit to the objects that are assigned the category.

I hope ur understand ....

Regards,

Sreeni.