So, I am able to rewrite things, but only on one level.

For example: categories.php?name=test1 => categories/test1

However, how do I go about rewriting multiple levels of categories?

For example categories/specific_category/etc-category/test1.html

RewriteRule categories/([^/]+)?/?([^/]+)?/?(([^/]+\).html)? script.php?lvl2cat=$1&lvl3cat=$2&page=$4

That's not what I mean.

What if you have a dynamic sub category system? You could have an unprecedented amount of sub categories and I'm sure declaring all those variables in the rewrite isn't the best way to go about it. Perhaps some sort of condition? I'm not up to scratch with this part of rewrite

In this case you better handle all specific requests with single script and analyze the request in the script. In your example you may use something like

RewriteCond ^(categories.*) /categories.php?req=$1

and then

PHP Code:

$cats = explode('/', $_GET['req']); 


In general, when you use mod_rewrite you should keep in mind that it is VERY resource greedy, so the more complex your rewrites are the more cpu it will take. In some conditions it is better to switch from mod_rewrite to request analysis in php.