What does it mean that V3 extensions is the disallowing of remotely hosted code

As wOxxOm noted, it means all of your code must be in the packaged you upload to the Chrome Web Store, you cannot include code from remote servers.

From the Overview of Manifest V3 docs on developer.chrome.com:

A key security improvement in MV3 is that extensions can't load remote code like JavaScript or Wasm files. This lets us more reliably and efficiently review the safe behavior of extensions when they're submitted to the Chrome Web Store. Specifically, all logic must be included in the extension's package.