Adding a Taxonomy inside of a Category?

I’m not sure if we’re allowed to link to other websites here but I am having trouble understanding how someone has done his/her directory.

The example site

It appears he has created a Category ‘Anime’, and a custom Taxonomy ‘Genre’ with the tag ‘Action’ inside of it. The question is, how did he link both the Category and the tags from ‘Genre’ together? I thought that was only possible with posts or pages.

Any help with this would be great.. my mind = blown.