Quiz

I would not call the Top category "virtual", but rather a "special" category, the top most parent category in a context, with the following characteristics:

• There is always one Top category in a context, and only one.
• The Top category is always at the top of the context.
• The Top category cannot contain questions. It only contains subcategories which can be can be called "top-level" categories (as Tim called them) since the Top category is not displayed like other regular categories.
• The Top category always contains at least one subcategory, that is to say one "top-level" category.
• As Tim mentioned, if you select "Also show questions from subcategories", the Top category lists all questions in the context.

Since the Top category cannot contain questions, if you "Create a new question" while the Top category of a given context is selected, Moodle will simply place the question in the very first top-level category in the question bank. In other words, don't try to create questions in a Top category, it doesn't work.

If we replace "category" by "directory" and "question" by "file", we have a discreet (not discrete) and efficient root directory without files but with main sub-directories, which can list all the files at once. In my opinion, this category structure of the Moodle question bank is very cleverly done.