Dictionary.com has it as "to arrange according to sort, kind, or class; separate into sorts; classify". I looked it up in the OED too -- mostly because we have one and I don't get enough excuses to use its nifty little magnifying glass -- and it also supports the notion that it means by category, not by order. The general verb definition is "to arrange things according to kind or quality", and there's a separate definition for software: "sort: Computers: the action of arranging items of data in a prescribed sequence".