I just use dynamic collections, eg. group games by their store-tags, eg. arpg, fps, puzzle, walking-sim, online-coop... etc, whatever I consider handy when going through all of it.
Sure, the categories have a lot of overlap, but I don't mind, the games list is a disaster anyway (>1300 games on account... yea.).
I used to maintain my own categories, but at some point the number of games started to be too much to do it by hand.
edit: One of the better features is to group games with online-coop with friends who have it too. Makes it a lot easier to find the next adventure to start after few beers.
yea I do also use the favorites (and two other manual lists), but thats about it. Mostly I just use the "last played" view of the library and hide games which aren't installed locally.