What is the difference between Access Levels and Categories?
Categories represent a folder structure for organising assets. This allows users to browse around and find things in this manner. Categories are NOT related to permissions.
Access Levels are tags that are related to assets. E.g. 'Universal', 'Marketing Only', etc. Access Levels ARE related to permissions.
Groups is the key that links users to access levels, e.g. person X will be a member fo the Marketing Group and they will as a result see assets tagged with the Marketing access level and any other access levels they are allowed to see.
Example 1: Normal User Group
This screen shows what members of this group can see:
Admin > Groups > [Access levels]

Here we can see that a member of the 'Standard User' Group can upload and download items tagged with 'Public' or 'Universal' access levels.
They cannot view assets tagged with the 'Marketing Only' access level.
Example 2: Marketing User Group

Here we can see that members of 'Marketing Group' can see, upload and download all assets, regardless of their access level.
So in summary, imgine a folder structure where you keep assets. This has no permissions. But each asset has been tagged with one or more access levels. Now, dependant on the group they are in, a user will be able to see some or all of the assets within the category structure.
Finally, by default, Asset Bank will hide any categories from a user if that category contains no assetsthat they are allowed to see.
E.g. instead of showing these categories to a user:
Fruit (0) Crisps (0) Drinks (7)
It only shows:
Drinks (7)
This is just to make the site appear more relevant for the partiicular user. This is not related to permissions.
Note1, admin users always see ALL categories regardless of number of assets within them.
Note 2, uploaders will still see all the category structure at point of upload (i.e. they will be able to upload to currently empty categories).