It's easy to understand if we break up the sentence into its pieces. Stripping away the modifiers, the sentence is just "In ways their parents had been hard on them". "Different" is an adjective that modifies "ways", implying that the ways were different for each child. "Defining" is another adjective that also modifies "ways", implying that the ways had a strong effect on each child - so strong that they had a permanent effect on each child, thereby "defining" the character of each one.

Maybe if I just rephase liberally. "Each of their parents had been hard on them in different ways, and in each case their parents' hardness had a defining impact." Here I replaced "defining ways" to make it clearer what exactly the sentence meant was "defining", but that still may be confusing. To say the parents' hardness was "defining" suggests that it had a lasting impression on the personality and/or position in life of the child.

'ways' = behavior If you are 'hard on' someone it means your behavior is demanding/strict. For example "I remember that my old Maths teacher was very hard on the class. He wouldn't allow us to talk at all during the lesson." In your example the text is talking about a man and a woman who are getting married. So when it says "their parents" it is talking about two sets of parents. The parents of the man and the parents of the woman (the narrator's grandparents). So the two sets of parents behavior was different, but in both cases they were strict towards their children, and this shaped the personality of the man and the woman....both had characters "defined" by their experience as a child