Engagement settings
To manage a site's engagement settings (what you consider to be an engaged visitor), go to Manage site > Settings > Engagement.
Bounced
Set the number of seconds under which you consider a session to have bounced. If a session has a duration shorter than this and does not meet the criteria for engaged, the engagement level will remain at bounced.
Engaged
Choose the minimum duration, or the minimum number of page views, that will be considered to be engaged. Any sessions with a duration longer than this, or with this number of page views or greater, will go to the engaged level.
It's also possible to set a minimum scroll depth for a session to be considered as engaged. This is set at 70% by default. Note that is in addition to either the duration or the number of page views, i.e. both the duration / page views and the scroll depth must be met.