Personally, I prefer to display my blog categories without in drop down box, but if you really have many categories on your blog, perhaps you can display categories in drop-down box so that your blog will looks more neat.

Below is the simple code to display categories:-

<h2>Categories</h2>
<ul>
<?php wp_list_cats('sort_column=name'); ?>
</ul>

To display categories in drop-down box, use the following code.

<form action="<?php bloginfo('url'); ?>/" method="get">
<?php
$select = wp_dropdown_categories('show_option_none=Select category&show_count=1&orderby=name&echo=0');
$select = preg_replace("#<select([^>]*)>#", "<select$1 onchange='return this.form.submit()'>", $select); echo $select; ?>
<noscript><input type="submit" value="View" /></noscript>
</form>