Hidden categories are categories which have been put into a special place with the category box at the bottom of pages. They are called "hidden" because the default condition of Special:Preferences is to exclude them from the category box.

IP users, in particular, have no way of seeing these categories, so they are actually hidden from the casual user of the site. Registered users must actively check a box at Special:Preferences/Under the hood in order to see them. Even when a user chooses to make them visible, they're still marked as "hidden", allowing the more advanced editor to easily control what the "average" user of the site can see, through the placement of the {{hidecat}} template.

In general, categories should not be hidden. However, there are some cases where it's justified. We don't necessarily want to advertise our maintenance categories to the readers of the site, so most of these categories are hidden. Also there are some instances where categories have been created expressly for playing the Game of Rassilon. We likewise cover these up.