When you click on the 'Relocate Category' link you can see the popup window with the instructions on how to relocate your category.
At the first step you should choose what you want to do with your category.
There are two possible options: 'move up/down on a level' and 'move before/after adjacent category'.
Once you click on one of these buttons you'll go to the second step.
After clicking on the 'Move up/down on a level' button a form will appear.
You should choose a new parent category for your category on this form.
So your category will become a subcategory to this parent.
Then you should click on the 'Set' button to confirm your choice.
After that the 'Categories' page will be reloaded with categories in the changed order.
After clicking on the 'Move before/after adjacent category' button a form will appear.
You should choose where you want to place your category on this form.
With the help of drop-down lists you can specify an order (before or after) of arrangement of your category and to what other category you want to relate this action.
Then you should click on the 'Move' button to confirm your choice.
After that the 'Categories' page will be reloaded with categories in the changed order.