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How do I set up the forums like the demo?

You need to create category parents for each group of forums. For example on the demo forum (http://socialize.wpengine.com/forums/), "General" is a forum category and is has two child forums called "General Chat" and "Random Discussion" - see attached screenshot.

Go to Forums > New Forum to create a header and on the right hand side select "Category" from the Type dropdown menu.

To create a forum under this header go to Forums > New Forum and on the right hand side select "Forum" from the Type dropdown menu.

This is how the final product looks.