Cat3 having the lowest performance and Cat6 having the highest performance.  I will spare you the technical details and instead give you the practical uses for each type of cable as well as applications not recommended for each category of cable.  If you would like more technical data on cable categories you can find it here. 

Category 3 cable, aka Cat3, is basic "voice grade" cable.  Cat 3 is suitable only for telephone wiring and should not be used for data or network transmission of any kind.  A few years ago I would have recommended not using Cat3 cable at all in your home, and instead going with Cat5 for all your telephone cabling.  Back then dail-up was the most popular internet service connection and phone cabling served the dual purpose of transmitting data and voice to your equipment.  Today, POTS (plain old telephone service) seems to be on its way out and is no longer used very widely for internet connections.  You may not even have regular phone service anymore, since there are many alternatives such as VOIP or wireless.  Since its not likely to be part of your data or internet network, and it is significantly cheaper than cat5 or cat6, it would be alright to use for your regular telephone outlets ONLY.  Never use Cat3 for data or network cabling.

Cat5 cable, which has now been replaced by cat5e (cat5 enhanced)  is, at the moment the most common network cable in use.  It is rated for transmission frequencies up to 100MHz.  This is basic data network cable suitable for most basic network applications.  Cat5e cable is suitable for data networks running 10Base-T, 100Base-TX and even 1000Base-T  (if carefully installed) ethernet. Common ethernet NIC cards and switches designated as 10/100 will transmit and recieve using 10Base-T or 100BaseTX.  Newer NICs and switches designated 10/100/1000 are capable of using these two, plus 1000Base-T.  1000Base-T is the standandard for gigabit ethernet over copper twisted pair cable.  1000Base-T devices are capable of transmitting data at a rate of 1 gigabit per second.  Cat5e cable can be used for gigabit ethernet up to 100 meters in length.  However great care must be taken in the installation to ensure that the cable and termination at the jacks and patch panel are done correctly.  Proper installation ensures that the transmission characteristics of the cable are not compromised, which could cause poor network perdormance.  Cat5e cable is also suitable for running POE (power over ethernet) devices.  Small devices like wireless access points and security camera, can be used in locations without a power source by sending the power to the device over the network cable on unused wires in the cable.  Power is supplied from POE capable switches or by power injectors at the switch side.  This is often a good option for wireless access points as they are often located in ceiling areas where there is not likely to be a power outlet close by.  Cat5e is suitable for all these applications, but should be considered the minimum requirement.  For anything more that a basic 10/100 ethernet network, I would recommend cat6 cable.

Cat6 cable is rated for up to 250 MHz and is suitable for 10BASE-T, 100BASE-TX and 1000BASE-T / 1000BASE-TX (Gigabit Ethernet). Cat6 will most likely be suitable for the 10GBASE-T (10 Gigabit Ethernet) standard,  but will have length limitations below the 100m standard.  If you want to future proof your home cabling cat6 is the way to go.  Cat6 is great for gigabit ethernet, POE, streaming video, IP security cameras,  Regular security cameras (using baluns) and most any technology you are likely to have in your home in the near future.  Cat6 is the most expensive of the cables we have listed here, but not by a great deal.  Copper prices fluctuate quite a bit, but at the moment Cat 6 costs about $50 more per 1000ft.  I would definitly recommend Cat 6 for all your network or technology cabling in your home.

To sum it all up, I would make these three recommendations:  Use Cat 3 cable for outlets in your home which will ONLY be used for regular telephone service.  Use Cat 5e cable if you have a small network and basic internet / home network requirements.  USe Cat 6 cable if you want the best quality connections now and in the future.  Look for more articles in this series soon, and I will also be covering coax cable types such as RG6 and RG59 and what their applications are in your home technology infrastructure.