Are they actually interested in my project or do they want to know how I solve problems? How can I ace this part of the application?
Even before you try to answer this, think about developing an "Elevator Talk" about your research. The idea is that if someone bumps in to you in the elevator and asks about your research you can explain it in the two minutes you have in the ride. Think about the key question(s) you are asking. Think about how you approach the solutions. Think a bit about the current state of it.
Once you have your elevator talk you just want to translate it into a slightly more formal written form. Key Question. Approach. Current state of progress.
It doesn't need a lot of detail and should fit on less than a page.
You might want two versions of your elevator talk. One for professionals in the field and another, less formal one, for other people you meet but who aren't in the same field. The one you want in the application is the formal one, of course.