Good to know for existence outside Duo - but if you try the formal you in Duo, unless it's written with a capital "L", or Duo pulls one of it's surprise grammar-tricks on us, "la" always means "her/it".
Given what you know about the real world, that's unfortunate, a bit.
In addition to being the direct object form of loro (le = "them"), le is also the indirect object form of lei, which may be what your confused about. As such, le means "to her/it, of her/it", and you don't understand "of" something or someone.
Rather, one understands direct objects, so la is required as it is the direct object form of lei.
"Her" or "it" is who or what you don't understand. In a parallel sentence:
Non posso capire la donna. Non la posso capire.
"I cannot understand the woman. I cannot understand her." [No hidden message here - I was just using the first feminine word that came to mind, to be consistent with the exercise.]
You can also say, Non posso capirla = "I cannot understand her."