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While you can bulk add categories to any item in older versions of Outlook by typing in the category field; beginning with Outlook 2007, you need to use the category menu or dialog to select categories.
This change was made to prevent user data from "leaking".
This key works with Outlook 2003 and up, you'll need to use the correct path in the registry for your version.
This can also be set using Group Policy; look for it in the Office adm files, under Outlook If you don't want to edit the registry yourself, download and run the registry file for your version of Outlook.
Exchange admins can configure Exchange to remove categories.
If you use Exchange and it's configured to remove categories, adding the key to Outlook will not work, you'll need to speak to your admin.
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Select the category on the left then the appropriate button in the dialog to add, edit, delete categories, or assign colors or shortcuts to categories.