Categorization is what's happening. Categorization occurs whenever lots of inputs are boiled down to a single output. This happens outside the retina and everywhere else in the brain, wherever a number of neurons give output to another neuron. Wherever there is a reduction of information, categorization occurs. Categorization is not just in language.
All neural beings categorize.
In some philosophical traditions, the belief is that we are supposed to rise above our categorizations and see the world as it really it, but this is impossible for neural beings. Besides the simple categories, there are also more complex conceptual categories. A lot of what this course is about is how you link up the low level information at the neural level with higher level conceptual categories, like room, chair, school, blackboard. Walking down the street, we make categories of the pavement vs. the street, things that move vs. things that stand still, things to step on vs. things not to step on, people you know vs. people you don't know, dangerous vs. non-dangerous things. In order to answer this question, you need to know something about conceptual categories.