Simply, from the File menu, select New Folder. Within this you can put normal albums, or smart albums of whatever categories you wanted, i.e. Family, then Weddings, Birthdays, etc.

Use keywords plus Smart Albums.

Of course, if by "a simple way" Bob means, "not tedious," then he may not like this method. It's a bit tedious to set up but easy to maintain afterward.

Start by assigning keywords to your photos. To set that up, invoke the keyword window with Command+K (or choose Window>Show Keywords from the menu bar). iPhoto comes with some default keywords but you can easily edit the list, add more, and best of all, assign a keyboard shortcut to each keyword.

When viewing photos, make sure you're set up to add keywords by turning "View Keywords" on with Shift+Command+K (or View>Keywords from the menu bar). You can select multiple photos at once and apply keywords by using the keyboard shortcut or by clicking the keywords' buttons in the keywords window. So you can relatively quickly go through all your photos and assign multiple keywords. In Bob's case, all the family events would get the "Family" keyword plus a keyword for individual events. Or keep it even more flexible: family, holidays, cousins (for "Holidays with the cousins").

Then set up the Smart Albums you want. Instead of choosing File>New Album go with File>New Smart Album. Give the Smart Album a name and set up your conditions - you can have one or multiple conditions the album must meet. If you set up Keyword > Is > Family you will have your master family album. And if add a second condition Keyword > Is > Cousins, and ask iPhoto to match all conditions (instead of any), you'll get an album filled with only photos tagged as Family AND Cousins.

This technique doesn't exactly create neat little sub-albums, but the organizational effect is the same. It's a bit like getting used to Gmail's "filters" instead of making email "folders."

And the real beauty of it is that every time you import new photos and tag them, they are automatically assigned to the correct Smart Album.

I'm eager to know if someone has an easier way. Right now, that's the only way I know, but it works great for me.

forgot to mention that the smart album obviously has to gather all pics tagged "family" or whatever you are trying to group

not being a huge iPhoto user or fan for that matter, I still thing this would work

Set up a smart album (I believe iP has these from a while back) and go through your library and tag your pics. Obviously if you have 3+ years of pics and none are tagged it is going to be a pain. This is a good reason to tag your pics on import.

HTH and i'm not totally off base.

mm66