In order to open the categories edit Screen, Click on one of the square category icons on one of the photos, and click on 'Edit categories'

You can change category names which will be visible in the category selection menu and as a tool-tip when the mouse is over the category icon of the photos.

To change the category name: Select the category and click on the text, type the new name of the category and exit the edit box, your changes are saved immediately.