Is it measuring the clicks/keycount used in a program? Its computational use? Something else?
I’m pretty sure that Application Activity meaures the uptime of your applications.
Merged duplicate post and moved it here.
It measures the active applications.
In regards to activity? If I leave my computer on overnight, why does it sometime log a ton of activity from Chrome, and other times nothing?
Because you leave Chrome running in the foreground/have it selected when you leave it idling. 
Ah, gotcha. So this logs whats in the foreground as a percentage of the time then?