This wiki is largely maintained by a bot. And while bots are fast, a lean, mean category tree will make them run even faster. If you nest categories within themselves, you create a recursive loop that traps the bot in an endless cycle. So don't do it.
Most people don't accidentally do that kind of recursion, however, because it's obviously pretty silly.
Don't mix two categories that have a lot of the same members
Another type of recursion is where you put big, important categories within other big, important categories, particularly when those categories share a lot of common ground.
The classic example is Category:The Doctor. This should never go in Category:Time Lords. Instead, put the page The Doctor in Category:Time Lords, and put Category:The Doctor at the top of the in-universe category branch. That way, Category:The Doctor is still easy to find, but it's not adding a couple of hours to the bot's runtime.
Otherwise, the bot will spend hours bouncing back and forth between categories under Time Lords and The Doctor. Why will this happen? Since the Doctor is a Time Lord, his category shares any number of pages and subcategories with Time Lords.
Now, this isn't to say that all categories about individual Time Lords should stay out of Time Lords. Category:Romana is fine to go under Time Lords because it's a very small category, and, importantly, it doesn't contain anything that's repetitive of what's already in Time Lords.
Don't reverse the order of categories
Recursion can also occur if you order categories the wrong way. K9 Mark I images goes into K9 images, not the other way around. Always build category branches from specific categories to more general ones.