The object of the challenge is to clear the game with the lowest character exp lvl. It's just a challenge to try after you've at least cleared the game once and want some replay value. I was able to clear the game at lvl 13/14 (lvled up after I killed the boss).
Some tips if you want to try the low lvl challenge:
1) Only stat boost Strength and Defense (I went Melee Strategy)
2) Keep up to date on the best gear. I started out with a full set of Old guard armor and a reserve of leather armor. Upgrade to ogre and paladin as soon as you can and then saint and minotaur.
3) Learn all the attack skills first.
4) Avoid unnessary kills (Boss fights are unavoidable)
5) You only need to turn in a few quests to advance the storyline
6) This map is awesome: [url=http://images.jayisgames.com/hs_tasteofawesome_castaway_2_map.png]
Have fun! and let me know if you want any specific hints or strategies concerning bosses.