Parsing huge xml file with lxml.etree.iterparse in python
The name fast_iter2 seems to lack much of a connection with the function is actually doing.

Rather then having your two sets be local variables, I suggest putting them as global constants.

Calling them elements and childElements is kinda generic. I suggest something more specific

Your loop is a bit awkward. Rather then collecting them in that iterative format, just grab everything when looking at the element tags. This makes the code filling up paper/authors more straightforward.  

Rather then having an empty if block and using the else block, invert the logic.

I suggest moving the element clearing code into its own function. This helps make the function actual task clearer avoiding the question of how to clear.

The del context line is useless. Del doesn't destory the object, it merely removes the object from the current context. If this was the only context in which object was refereed to then its reference count would drop to zero. However, that's not the case here as the calling function will keep it alive anyways. Even if it did, the memory savings aren't worth worrying about since the whole script is about to end anyways.

My reworking of your code, no testing has been done on it:

    CATEGORIES = set(['article', 'inproceedings', 'proceedings', 'book', 'incollection', 'phdthesis', "mastersthesis", "www"])
    SKIP_CATEGORIES = set(['phdthesis','mastersthesis', 'www'])
    DATA_ITEMS = ["title", "booktitle", "year", "journal", "ee"]

    def clear_element(element):
        element.clear()
        while element.getprevious() is not None:
            del element.getparent()[0]

    def fast_iter2(context, cursor):
        # Available elements are:   article|inproceedings|proceedings|book|incollection|phdthesis|mastersthesis|www
        # Available tags are:       author|editor|title|booktitle|pages|year|address|journal|volume|number|month|url|ee|cdrom|cite|
        #                           publisher|note|crossref|isbn|series|school|chapter

        paperCounter = 0
        for event, element in context:
            if element.tag in CATEGORIES:
                authors = [author.text for author in element.findall("author")]
                paper = {
                    'element' : element.tag,
                    'mdate' : element.get("mdate"),
                    'dblpkey' : element.get('key')
                }
                for data_item in DATA_ITEMS:
                    data = element.find(data_item)
                    if data is not None:
                        paper[data_item] = data

                if paper['element'] not in SKIP_CATEGORIES:
                    populate_database(paper, authors, cursor)


                paperCounter += 1
                print paperCounter

                clear_element(element)


EDIT

How to avoid an explicit counter:

    CATEGORIES = set(['article', 'inproceedings', 'proceedings', 'book', 'incollection', 'phdthesis', "mastersthesis", "www"])
    SKIP_CATEGORIES = set(['phdthesis','mastersthesis', 'www'])
    DATA_ITEMS = ["title", "booktitle", "year", "journal", "ee"]

    def clear_element(element):
        element.clear()
        while element.getprevious() is not None:
            del element.getparent()[0]

    def extract_paper_elements(context):
        for event, element in context:
             if element.tag in CATEGORIES:
                   yield element
                   clear_element(element)                 

    def fast_iter2(context, cursor):
        for paperCounter, element in enumerate(extract_paper_elements(context)):
                authors = [author.text for author in element.findall("author")]
                paper = {
                    'element' : element.tag,
                    'mdate' : element.get("mdate"),
                    'dblpkey' : element.get('key')
                }
                for data_item in DATA_ITEMS:
                    data = element.find(data_item)
                    if data is not None:
                        paper[data_item] = data

                if paper['element'] not in SKIP_CATEGORIES:
                    populate_database(paper, authors, cursor)


                print paperCounter