I would like to create a page that shows a list of product categories, such as;

Clubs
Bags
Balls
Shoes

When clicking on one of the categories, I would then like to see all the images contained within.

This is essentially like the demo page demo.getk2.org/catalog

I have created the categories as outlined above, and created a menu item showing category, but all I can see is a page showing the category at the top of the page with "Childrens Items" underneath.

How can I get my site to look like the demo?

Start by setting catelogue mode to on in other layout options
and
Columns to 3 in subcategory handling

Many thanks for the feedback, however I do have the catalog mode set to Yes.

I have done some resizing of images and it looks a bit better, but I am not sure I have the categories defined correctly.

I have attached a screen shot of a sample of product categories to see if this is correct?

Any comments welcome.