not much documentation, but after contacting the creator they claim you should be able to filter by category - I just cannot figure out how to implement it as the terminology seems to specifically refer to "tags" (unless I am looking at the wrong thing...)

Here is the documentation:
12.3.4. Tag Filter
Since version 8.4 there is a new feature: Tag Filter. You can define variables for a Session or URL that store tags. DNNArticle List can show articles that have these tags only.
The settings are as below:
Filter tags: You can enable or disable this option.
Tag filter parameters: Tag filter parameters in URL or session. You can define several parameters and use ',' to split these parameters.

Sadly, they
A) do not tell you how to actually implement or provide an example and
B) do not include all the properties available in the Article List module
- enable tag filter (checkbox) HELP: Filter Tags in session or URL
- filter tags (textbox) HELP: Filter Tags
- tag filter parameters (textbox) HELP: Tag filter paramters in URL or session. User ',' to split parameters.

I have tried a few things but no luck - if anyone has successfully set this up, please let me know.

Thanks!

The filter by session can only work with tags. It can filter category by url passing in the parameter: cid=[categoryid]. Can't get this to work.

The tag filter works like this:
Enable tag filter: enables the tag filter
Filter Tags: The tags you want to filter this list by (manual filter)
Tag Filter Parameters: The parameter of the parameter=value pair in the url or session you want to use to filter(dynamic filter). multiple parameters are separated by tags

Example
Enable: checked
Filter tags: blank
Tag filter parameters: tag1
URL: http://mysite.com/articlelistdemo.a...g1=vehicle

NOTE: cannot seem to get multiple tag parameters to work properly - please post if you know how this works.
Result: Your results will show all items with tags equal to "vehicle"