So by day she'd weave at her great and growing web – by night, by the light of torches placed beside her, she would unravel all she's done. three whole years she deceived us, seduced us with this scheme. what does the "web" in the passage above refer to?

The most relevant meaning of the web in the above passage is the shroud of penelope. In the Book 2 of Odyssey, she pretended to be weaving a burial shroud for Laertes and she will choose a suitor once she has finished. However, every night, she will undo a part of it, until Melantho discovers her trick and reveals it to the suitors. Hope my answer has come to your help.