The first categorized column in this view does not sort on the Categories field. Choose another categorized view using the View menu.

What happened

You tried to categorize a document in a view that wasn't designed to let you use the Categorize dialog box.

What you can do

Press CTRL to keep the document or documents selected that you want to categorize, switch to another view, and try again. Views that let you use the Categorize dialog box are usually called something like By Category or All by Category.

You can also ask the application designer to redesign the view you were originally using.