In XSLT 2.0/XPath 2.0 use the standard XPath 2.0 function tokenize().
In XSLT 1.0 one needs either to write a recursively called template or, more conveniently, use the str-split-to-words function/template of the FXSL library.
Here is an example of the latter: 
<xsl:stylesheet version="1.0"
 xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
 xmlns:ext="http://exslt.org/common"
>
<!--                                                 -->
   <xsl:import href="strSplit-to-Words.xsl"/>
<!--                                                 -->
   <xsl:output indent="yes" omit-xml-declaration="yes"/>
<!--                                                 -->
    <xsl:template match="/*">
      <xsl:variable name="vwordNodes">
        <xsl:call-template name="str-split-to-words">
          <xsl:with-param name="pStr" select="string(@value)"/>
          <xsl:with-param name="pDelimiters" 
                          select="', 
'"/>
        </xsl:call-template>
      </xsl:variable>
<!--                                                 -->
      <xsl:apply-templates select="ext:node-set($vwordNodes)/*"/>
    </xsl:template>
<!--                                                 -->
    <xsl:template match="word" priority="10">
      <a href="x.asp?item={.}"><xsl:value-of select="."/></a>
    </xsl:template>
<!--                                                 -->
</xsl:stylesheet>
When the above transformation is applied on the provided XML document:
<item value="category1,category2">Item Name</item>
the wanted result is produced:
<a href="x.asp?item=category1" xmlns:ext="http://exslt.org/common">category1</a>
<a href="x.asp?item=category2" xmlns:ext="http://exslt.org/common">category2</a>
The pDelimiters parameter of this template allow multiple delimiting characters to be specified. In the above example, any separating character can be either a comma, a space or a new line character.