I think they mean something like widevine a la Netflix. Granted there are bypasses for some levels, but that could be a problem imo, iiuc that’s why there aren’t any alternate frontends for Netflix or HBO. I think that would also potentially mean issues playing YouTube in chromium or firefox on Linux if they used L1 (not sure what the current state of widevine on Linux is, last time I had Netflix I couldn’t watch on Linux and had to use my phone or Chromecast)
From the related post linked by op, it’s described as just a portion of the managed instance hosting fee going back to the project devs. So if you pay them to host a lemmy instance, a small cut goes to Lemmy devs. Doesn’t seem sketchy at all. Seems to have nothing to do with monetizing the instance itself, which could be funded by voluntary donations as normal or you could probably do membership fees as some instances do. It seems this is just about giving funding to the software devs. Hopefully this encourages other managed hosting providers to also give a cut of their revenue to the software they are using for their business.