In general, "AdWords Competition" is all about paid traffic competition. The more people that are bidding on a keyword, the larger the orange bar will be. That is an indicator of the commercial value of a keyword.
In the Project dialog box, where it is represented with a percentage, it is the value as seen in the Google Keyword Planner Tool. Google's explanation is as follows: "The number of advertisers that showed on each keyword relative to all keywords across Google. We calculate the number of advertisers bidding on each keyword relative to all keywords across Google. Note that this data is specific to the locations and Search Network targeting that you've selected."