The community needs to develop an active test project; it must remain active until approval (automated statistics, recent changes). It is generally considered active if the analysis lists at least three active, not-grayed-out editors listed in the sections for the previous few months.
"Wikipedia talk" (the discussion namespace of the project namespace)
Default is "no". Preferably, files should be uploaded to Commons.
If you want, you can enable local file uploading, either by any user ("yes") or by administrators only ("admin").
Notes: (1) This setting can be changed afterwards. The setting can only be "yes" or "admin" at approval if the test creates an Exemption Doctrine Policy (EDP) first. (2) Files on Commons can be used on all Wikis. (3) Uploading fair-use images is not allowed on Commons (more info). (4) Localisation to your language may be insufficient on Commons.