Schools look at where you apply?

I agree w/ aaudetat that it's none of their business. I think a polite way of getting this point across without being rude is you could say something like, "I applied to a handful of schools," or "I've narrowed my search down to several schools that I think would be a good fit. While the schools are not all similar in terms of their teaching models and overall approach, there are very specific things about each that appeal to me."

As with any question in an interview, if you don't feel like answering it, or are not able to think of an answer on your feet, you can just talk about something else. For instance if they say, "Tell me about a time when you faced something that was nearly impossible to overcome." This seems like a real stumper, but you can always address a question by deflecting it and then talking about something else. For instance you could say, "Well no situation is coming immediately to mind that I would characterize as "nearly impossible," but there was an instance at work a couple of years back where I was pushed to my limits by an impending deadline for a project that......."

I think in general with interviews its good to keep in mind that the questions are most asked just to facilitate conversation and see how you think, so if you're smoothly evading questions it's not a bad thing, this is a valuable skill to have. It would be nice if you could answer every question asked of you in as direct a way as possible, but if something comes up that you're not comfortable answering, it's better to skillfully evade the question than to stammer or to totally blank and not say anything.