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Meaning: more limited mentally or physically than most people
Our special students are physically or mentally challenged in some way.
She's physically challenged and uses a wheelchair, but she's very active.
Note: The word "challenged" is a politically-correct euphemism for the old-fashioned and offensive word "handicapped". It's also found in many euphemisms that make fun of political correctness, like "vertically challenged" for a short person, "follicly challenged" for a bald person, and "cerebrally challenged" for a person who isn't very clever.
Compared to "handicapped", the word "challenged" is