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A user category can contain other metadata such as tags, authors, series, or what-have-you. For example, you could make a user category "Favorites" that contains your favorite authors, favorite series, and tags that indicate a book is a favorite.
A subgroup is simply a hierarchy in an existing category, such as a tag History.Military History. 20th Century. It exists only to make viewing the category easier. Turning it off and on does not change what the category contains, only how it is displayed.
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