I do it by gameplay genre or the main draw of the game.
Examples by gameplay genre.
Binary Domain is a Third Person Shooter.
BattleBlock Theater is a platformer.
Syberia is an Adventure game.
By main draw of the game.
Don't Starve is a Survival game for example.
Commandos: Behind Enemy Lines is a Stealth game (and a great one at that).
Portal is a First Person Puzzle.
I also have categories for technical reasons. ZZZ Don't Work for, well as it says, titles that don't work on my system either due to age or incompatible hardware or other issues I'm not willing to fix at the moment (such as those few titles that require a downgrade of a driver).
I also don't put a game into a category until I beat it and have from recent experience a good idea of what it is, or at least a good idea of what I got out of it and would play for again (e.g. Horror for Motte Island.
My way is slower to be sure, but lets me believe in a firmer grasp in how I set up categories and a good idea of what to play next for my "backlog" because it's all in one giant unsorted pile.
Those are good. My idea of genres is still firmly rooted in 2001. I'll take some cues from you. Thanks.