Categories for only the selective location from the combo box

This is driving me crazy I will like to know how do get it so that when someone selects a location from the combo box it will shows all categories for that location only.

Creating a free classifieds site that's the link below just to show u what I want
http://www.freelocalclassifieds.in that is the site I'm working on has u can see its still a work in progress just need to figured how to get it so when someone selects a location from the combo box it shows the categories for that location only and not all the locations.

Can anyone help I will appreciate it.

Thanks!