A difficulty level was a measurement of how hard a holoprogram or other diversion was to complete successfully.
In 2367, Geordi La Forge played a game while travelling to an artificial intelligence seminar whose difficulty level increased with each successive question. (TNG: "The Mind's Eye")
In 2368, Alexander ran Worf's Klingon calisthenics program at the novice difficulty level. (TNG: "New Ground")
In 2369, Worf noted that Jean-Luc Picard's having increased the difficulty level of a training program was the reason for his slowness. Picard assured him he did so because their upcoming mission was going to be even harder than that. (TNG: "Chain Of Command, Part I")