A Leaf category is the lowest level of category, it is a category that has no sub categories under it. In every listing you submit to eBay, eBay REQUIRES you to specify a category that is a leaf category, otherwise eBay will reject your listing.
For example,
Consider the following category hierarchy:
Home appliances
Small Kitchen Appliances
Electric Pasta Makers
In this example, since there are no further sub-categories under "Electric Pasta Makers", it is the leaf category. eBay requires that you list your item using the category "Electric Pasta Makers" ONLY.