Question

I have sidebar and when I add the components to it, the heading get added inside the li items of ul, making it look ugly. How do I overcome this. Unfortunately I have little or no knowledge of both wordpress and php.

here is how I get it in firebug:

<li class="widget widget_categories" id="categories-8"><h2 class="widgettitle">Categories</h2>
        <ul>
    <li class="cat-item cat-item-1"><a title="View all posts filed under Uncategorized" href="http://localhost/wordpress/wordpress/?cat=1">Uncategorized</a>
</li>
        </ul>
</li>

This is what I have in sidebar apart from some static html ul li pieces:

<?php if ( function_exists('dynamic_sidebar') && dynamic_sidebar() ) : else : ?>
        <ul class="ul-cat">

        <?php wp_list_categories('show_count=1&title_li='); ?> 




        <?php wp_get_archives('type=monthly'); ?> 
</ul>       
        <?php endif; ?>

Answer 1

To use wp_list_categories and wp_get_archives inside your sidebar.php you can follow
wp_list_categories and wp_get_archives.

If your theme supports dynamic sidebar then you can remove wp_list_categories and wp_get_archives function calls from your sidebar.php and can use dynamic widgets from WordPress admin > Appearance > widgets and add Categories and Archives widgets to your sidebar.
This is only an example, basically resides inside functions.php, generates dynamic widgets

if ( function_exists('register_sidebar') )
register_sidebar(array(
    'name' => 'Sidebar',
    'before_widget' => '<li id="%1$s" class="widget %2$s">',
    'after_widget' => '</li>',
    'before_title' => '<h2 class="widgettitle">',
    'after_title' => '</h2>'
));

If you leave before_title and after_title blank as follows

'before_title' => '',
'after_title' => ''

Then your h2 will be gone.

Note: In your question you mentioned h3 but in your generated HTML code I saw h2.