What Discourse means by ordering by activity is that categories will be ordered based on the time that the last topic or post in the category was created. For example, if a reply is created to a topic in your WEB category, that category should get pushed to the top of the category list.
Subcategories are ordered in the same way. As an example, creating a new topic in my ‘scratch thirteen’ subcategory both pushed ‘scratch thirteen’ to the top of the subcategory list and pushed the ‘scratch’ category to the top of the category list:
