Excluded category names are not indexed as keywords for the product and are not included in search phrase suggestions. This is useful for combination categories that have subcategories with distinct products.
For example, if your storefront has a kitchen and bath category and the customer searches for kitchen, you do not want bath items to be included in the search result because of the kitchen and bath category name that is inherited by all products in that catalog tree.
However, don't exclude categories if they contain products that are not assigned to subcategories or additional categories that can be indexed. There might also be combination categories that you don't want to exclude, such as headphones and earbuds, where you want related products to appear. For example, if a customer searches for headphones, you might want lower-cost earbuds to also appear in the search.