Option #2. Discuss some issue of personal, local, national, or international concern and its importance to you.
Be careful to keep the "importance to you" at the heart of your essay. It's easy to get off track with this essay topic and start ranting about global warming, Darfur, or abortion. The admissions folks want to discover your character, passions and abilities in the essay; they want more than a political lecture.
1. Be Sure to "Discuss"
Be sure to read the question carefully. The common application is not asking you to "describe" or "summarize" an issue. So, if the bulk of your essay is describing the terrible conditions in Darfur, you are not answering the question. To "discuss" something you need to think critically and write analytically.
2. Focusing Close to Home is Often Better
The admissions office gets lots of essays on big, newsworthy issues like the war in Iraq, the fight against terror and U.S. dependence on fossil fuels. In truth, however, these giant and complex issues often don't impact our immediate lives as much as more local and personal issues. Since colleges want to get to know you through your essay, be sure to focus on an issue that will actually teach them something about you.