The competition levels that are represented by the "Rank 1-10" and "Rank 1-3" etc. orange bars in SECockpit are calculated using what you see in the detailed keyword analysis.
When you double-click on any single keyword in the list, it will open up the detailed analysis view, which shows you the data we've gathered for each keyword. This includes basic on-page optimization factors, the page's mozRank (equivalent to Google PageRank), page and domain authority values (based on age of site, number of indexed pages, number of pages on the domain ranking for search terms and many other factors) and the number of backlinks for each page.
All these factors are collected for each of the top 10 ranking pages for each keyword. All this data is then crunched down into a simple graphical representation going from "very easy" (small orange bar) to "very difficult" (full orange bar).
Please note that this is just a general opinion - be sure to always look at the top 10 results in detail, as sometimes specific results can obscure the average value.