I believe all replies where very clear that you got so I do not see what your not understanding.
Let's go through it once more and hopefully you will understand.
In admin => edit usergroups you set the overall global permissions for each usergroup. This should be self explanatory.
In admin => edit categories you can set where your speaking about a more in depth permissions structure on which usergroups can view that specific category, upload ads, post comments and have content watermarked for each category.
I do not know how easier to explain it as thats as about plain as it gets explaning things.
As I posted there is a typo in the code as I posted above where the viewing permissions was being used not upload permissions and I suggested where to edit a file to fix the issue on your site.
You can redownload the code and upload the pp-inc.php if thats easier for you.