2.- Use an existing folder or create a new one (in this example theme \ aigne \ pix \ cat) to copy the images to be used as icons/backgrounds/images. I highly recommend that the name of the image is the 'ID' of the category to easier make updates or changes.
So yes, in Franc's example, the images are stored in /theme/pix/cat/ and the name of each image is 1.png or 2.jpg etc with the number being the category ID as suggested.