TLDR: they are making usernames/handles globally unique (previously case insensitive and appended with 4+ digit number). Display names can be anything. Usernames and handles only really used to connect or differentiate/compare profiles.

Effectively in a Nostr world, pubkeys are too hard to share, use a NIP-05 as handle, (Display) Name yourself whatever.

Maybe “Nostr Username” or “Nostr Handle” are a better lexicons for NIP05 identifiers. It helps take away the ‘verified/verification’ misunderstanding. I guess it’s possible to read-only login using your nip05 as a username too.