What is does
Title: Enter the Widets Title
Display as Dropdowns: If you have a lot of categories, this option will display the selections as a drop down menu, vs a long list. Better for long lists.
Show Post Counts: If you check this option, a number will appear along with the category letting the reader know how many news articles appear under that category.
Show Hierarchy: If you check this option, the list will indent child categories of parent categories.