According to the instructions that accompany the module:
If you wish to use the Uncollapsed Categories Tree to display all subcategories all the time, do the same to /ch_category/includes/modules/sideboxes/your_template/, and /ch_category/includes/templates/your_template/.
Then ftp the /includes/ folder inside /ch_category/ to the same place.
Rename the main package's stylesheet_categories_dressing.css to stylesheet_categories_dressing.css.bak to avoid conflicts.
Activate the chcategories sidebox as described in readme_ch_categories.txt.
... you will apply this stuff ONLY if you want to use the Uncollapsed facility.
If you do, then OPEN ch_category folder, where you will again see includes folder.
This then corresponds with includes folder in your zc installation. Then you follow the instructions for that feature.
If you DON'T want the uncollapsed functionality, then ignore that folder.
My advice is to try the normal functionality first (ignore that folder).