At Admin Panel -> Categories -> Category Settings -> "Levels to display for category selector:", you can choose the number of levels for your category selector. This controls the size of the dropdown navigation menu at the bottom of pages (that's where it is in the default wrapper template, could be anywhere you put it), as well as the selectors on the submit and edit pages. You will want to keep it short enough that it's a useful navigational aide and not just eating your bandwidth and slowing page loading for modem visitors.

If you have thousands of subcategories, consider limiting the levels and then switching on the level-based category selector so that people will still be able to submit to deeper levels.

If you have more than 2000 categories and haven't set the $overridesafety tweak, the levels will be automatically reduced to 1 to prevent the sheer size from creating errors.