According to the nlab, horizontal categorification is a process in which a concept is realized to be equivalent to a certain type of category with a single object, and then this concept is generalized to the same type of categories with an arbitrary number of objects. The prototypical example is the concept of a group, which horizontally categorifies to the concept of a groupoid. It is well-known that in certain parts of algebraic topology groupoids are much more convenient than groups. Similarly, monoids categorify to categories, rings to linear categories, etc.
I have two questions about this. Let C be a concept which horizontally categorifies to a concept D.
1) In many examples, C and D have been known and developed independently from each other. Or at least, D was not introduced as the horizontal categorification of C, but rather this connection was realized afterwards. For example, I am pretty sure that k-linear categories were not introduced as a horizontal categorificiation of k-algebras; instead they were introduced because of the abundance of examples of (large) k-linear categories which appear in everyday mathematics. Although representation theory seems to be in a current progress of a generalization from k-algebras to small k-linear categories, the concept of a k-linear category was already there before that. Are there examples where D was developed with the purpose to categorify C, say in order to solve some problems which deal with C but which are not solvable with C alone? Perhaps C*-categories (categorifying C*-algebras) could provide such an example, but I am not familiar with the history of this concept. And maybe there are other examples as well?
2) In all the examples I know of, it is trivial that C has a horizontal categorification and that it is D. Are there any more interesting examples where, when you look at C, it is not even clear how to interpret C as a type of category with one object? I would like to see examples where the connection between C and D is deep and surprising. These examples should illustrate why horizontal categorification is an important and useful concept in practice.
I could also ask a more provocative question: if any mathematician working outside of category theory reads the nlab article in its current form, why should he/she even care, since, after all, both concepts C and D have been there already without the categorification process?