Organizing your blog can be a little tough until you figure out how labels are used.
Labels allows users to navigate through your blog easily and efficiently,
when you ad a new label to a blog it is automatically added to your categories list (labels Gadget). Although creating a new page for each blog category seems to be the way to go at first glance it would be impossible to do so.
Google will only allow one blog per page and the reason google organizes it this way is so you can have one blog in multiple categories with out the content being repeated.
Labels are not indexed by google and there for you can have duplicates of blogs listed in different categories with out the info being redundantly copied through out your blog.
In order to see your category list ad the gadget Labels. you can even have it in the form of a bar across your page simply drag the gadget to the top of the page in your layout and click preview.
Place the labels tab where it says sponsor you will get the Lables tab to look and act like a bar.
Pages should be used to show one piece of content eg. About, Contact us or Links
When adding a label to a blog simply click on the labels tab and click the labels you want that blog to show up in. To create a new label simply type it and it will automatically be added to the label gadget.