"They say you are beautiful."
Translation:Ili diras, ke vi estas bela.
In this case, wouldn't it be better for them to have had the English translation as "They say that you are beautiful"?
In English those two are pretty much the same thing but many other languages require the explicit "that". So I think it's fair game for Duolingo to ask you to make that mental leap as part of the skills you're learning.
Just as topherhunt said, there are languages which require "that" in the translation, such as Esperanto. English sentences which can normally be understood without "that" are translated in Esperanto as if "that" is still in the sentence (like this sentence Duo gave, for example).