ön is used to address someone in a formal and polite way. English doesn't make this distinction, but many other languages do. Maybe you're familiar with German du vs. Sie where the former is informal and the latter is formal. The same holds for French tu vs. vous and (European) Spanish tú vs. usted.
You would use ön or maga in a formal setting, say to address someone you're meeting for the first time, a teacher, a boss, etc., but also in a shop when you're talking to the salespeople.
It's not fair: previous phrase was in Hungarian Ki őn? and correct translation was Who is he? (your application says that my answer is incorrect Who are you?); now, I suggest that correct answer will be He is not tall, but short, but again it is incorrect, because your correct answer is You are ... Maybe, it'll be better to accept He is/She is as well correct as You are, because actually in English there is no difference.
You mixed up two examples there — Ki ő? means ‘Who is she?’ or ‘Who is he?’.
Ki ön? (with a short vowel and an n) uses the formal pronoun ön which looks like third person when you look at the verb, but is used to address the speaker. I checked the translations now and they should be fine!