What is "Difficulty?"
Essentially, difficulty is the quantitative measurement of how much you learned a kanji. When you get a new kanji, the difficulty for it is set to 1. If you answer it correctly, the difficulty of that kanji gets halved, so it would get set to 0.5. However, if you get it wrong, the difficulty would get set back to 1 and you would have to learn it all over again. But, if you get the kanji wrong again, the difficulty gets multiplied by 4. It's basically a bastardized version of the Spaced Repetition learning technique where you periodically get reminded of the kanji over time, but in this case however, time is not a part of the equation and you can learn at whatever pace you want.
Does this spy on me?
No. This webpage makes absolutely no HTTP requests to any external or internal servers. You can verify this yourself by looking at the JavaScript code this is running on. The only thing it stores is the kanji you learned, and even that is only stored locally on your device.