Hi Chaitanya,
A Characteristic restriction is a filter to limit the database selection. You can think of a global filter, a Restricted Key Figure or a Selection in a Structure. It can be hard-coded in the Query or one of its reusable Query Elements or via a Variable.
A default value is a proposal which is normally an input-ready Variable. The user can overwrite this proposal or accept it.
I hope that this short explanation makes sense.
Best regards,
Sander