Categories for event gallery work exactly like they work for Joomla articles, weblinks or contacts. You can create your own hierarchy and use this hierarchy in the front end. You can use a category to filter events for a list in the front end. In addition you can create a menu item in combination with the Categories view to let your visitors browse through your hierarchy.
Categories are *NOT* physical sub folders in any way. They are just there to provide the option for creating a browseable hierarchy in the front end.
Localization of categories is possible too. There is an Event Gallery tab for a category where you can enter the title and description in multiple languages. If you use those fields the normal title and description is not longer used so don't get confused.