What does "Migrate Source Store categories into Shopify Automated Collections" option do?
Please note that Shopify has a specific system of categories and subcategories. The categories are called collections and subcategories are organized according to product tags. Collections are of two kinds - manual and automated.
Additional option “Migrate Source Store categories into Shopify Automated Collections” guarantees that your product categories will be transferred to automated (smart) collections, the products will receive tags and will be arranged to the corresponding collections with all the relations between subcategories of the source store preserved.
It is strongly recommended to choose this additional option while migrating product categories and subcategories to Shopify. It will saves you much time and effort of arranging all the tags into collections manually. If you do not choose this option, the categories of the first level will migrate into collections, and the products will receive tags and will not be arranged according to the source store.
Learn more about what product collections are, how to create and edit them by reading Shopify documentation.