Organizing and displaying projects can be done in an easy way if you use categories, types and tags. Let's see the difference between them.
Tags and categories refer to standard functionality offered by WordPress. Tags allow to highlight the most important key words, that can simplify the search (if used for any tag cloud) or simply distinguish the projects.
Categories have the settings similar to Types: you can add/edit name, slug, description and manage the hierarchy level. For instance, "post" category refers to parent "blog" category. Various notional connections can be emphasized in a such way:
And here's an example of Project Types section:
Project Tags settings don't have an option to settle parent tags, but there's one point you won't see on other mentioned taxonomy elements - Popular Tags cloud:
Types can be used on Portfolio Page template to select the projects you'd like to show:
Types are also mentioned in widgets settings: in CMSMS - Popular Projects and CMSMS - Latest Projects widgets.
You may also select the definite types of projects in Post Types shortcode:
Categories can be frequently seen on Portfolio page - in drop-down sorting menu (example screenshot taken from Industrial theme):