A person or entity in fiction is generally a character, but this page is more meant for more or less defining how to sort character-related articles.
Category:Characters is a root level category so its primary function is to list the categories that should appear under it. First, the Xanth characters category is for all characters from Xanth. so for example articles about various kings and magicians should be put there.
The Characters by Species category is mostly an alternative method of sorting all the characters that this wiki may eventually have.