This is a super simple text field. Each language will be listed as shown.
Category lets you categorize your Variables but you cannot create a new Category from here.
Copy data from: is useful if you are using localized variants of English (EN US & EN UK) or other languages that share grammar and syntax but have different idiomatic usage.
Tip: If you do not want an LRM to show, leave a single space in the field before you save it or else the Default Value might be used.
While not commonly used anymore because of massive advances in CSS, some sites might use images. LRM's allow merchants to create and manage localized versions of these (logos, trust builder icons etc.). Never randomly try to add an image call to an existing LRM if it wasn't an image already.
This also illustrates the "Copy data from:" functionality