What does it mean when it says on a grad school application to choose recommender "familiar with the candidate's scholarly abilities"? I'm applying to graduate programs in Biomedical Engineering. The University of Pennsylvania application says the author of one letter of recommendation must be a faculty member who is familiar with the candidate's scholarly abilities. In layman's terms, does this mean they want a letter from a faculty member who has served as my research advisor?
It doesn't necessarily mean your research advisor. It could be a faculty member you've taken classes with, someone you've worked on a project with, etc.

What the admissions committee is looking for is evidence that you will succeed in graduate school - and that means evidence that you can think independently, tackle difficult problems, and so on. Choose faculty members who can speak to your abilities as a student and a (future) researcher.

When I asked for LoRs, I asked (1) a faculty member I had taken several classes with and with whom I was working as an undergraduate research, (2) another faculty member I had taken several classes with and had a good working relationship with, and (3) a faculty member who I was currently taking a class with (and who admittedly was an alumnus of my top school) :-)