How to Create Separate Link Categories in Sidebar

I’ve organized my blog into 5-6 categories, and want to have each category in my sidebar with a link to the first 5 items in each category.

As an example – here’s a site that does exactly what I’m trying to do. In this case, he has a categories called “In the News”, “Take Action” and “Top Tips”. Each of these 3 categories has 5 or so links to articles within each category. He’s done something similar for his forum with his “Discussion” category.

I can’t figure out how to do this – is it done with a specific widget, with static pages or??

Thanks,

GreenChameleon
thegreenchameleon.com