Nearly all of the Sites that I have seen under ExpressionEngine make some use of Categories; either for labeling, or grouping, or navigation. ExpressionEngine has an extremely robust category implementation, including the ability to use category URL titles, category custom fields, and conditionals based on categories.
The next few lines in our default index template are simple, and introduce us to the tag that allows us to output the list of categories belonging to that weblog, as links to that category. Shall we just jump right in?