This means to write a short response to each criteria outlined in the position description. This can either be part of your cover letter or as a separate document as part of your application.
Some selection criteria require a brief response such as "applicants must hold a current Victorian drivers license", this could easily be answered by writing a sentence to confirm the type of Victorian drivers license you have.
Others may require more detailed responses, such as "personal values and behaviours aligned to those of Knox City Council", this would require you to review the values of Council and write a few paragraphs about how you would demonstrate these values if you got the position you are applying for.