Customise the Category Widget

You can use any of the parameters from wp_list_categories and the widget_categories_args filter

You can style the output with these CSS selectors:

 li.categories { ... }  
 li.cat-item { ... }
 li.cat-item-7 { ... }  
 li.current-cat { ... }
 li.current-cat-parent { ... }
 ul.children { ... }