It’s an ill defined and arbitrary term (since the genesis of the argument is from people who want to argue against LGBTQ+ inclusion while claiming, amusingly, that they aren’t actually against LGBTQ+ inclusion), but the general gist seems to be “inclusion that calls attention to itself”. This is mostly, though not limited to, either a new character whose trait the story obviously calls attention to, or when the trait is added to an existing character.
So Pelagos is “fine”, since if you didn’t talk to him at a specific point you’d never know he was considered a woman in his mortal life. Mattias Shaw is less so simply because he’s a major lore character, even though it’s at best implied in game and only confirmed in ancillary material.
While it’s a victory that the Overton window has moved such that inclusion is possible, the fact it’s only tolerated so long as said inclusion doesn’t make much of a presence shows we have a long way to go.