It's pretty clear that it means the next Xbox will be digital only, but MS wants to get ahead of the Sony backlash by letting people take their entire(*) library with them to the next gen.
It's a dark future dressed up as short-term convenience.
* "supported disc(s)" only.


They aren't going to let one person buy a disc, then share that disc among all their friends and they all get a copy.
Like I said, I'm reading between the lines a bit, but here's another source from before the official announcement:
https://www.purexbox.com/news/2026/07/report-xbox-disc-to-digital-feature-will-allow-you-to-digitise-your-physical-collection
Maybe "serial number" isn't exactly the right word for what's happening, but they apparently have some way of fingerprinting the disc itself so they know when it is being used by someone else.