This is an analogue of the Continuity Camera, which appeared in iOS 16 and macOS 13. True, the wireless connection of Android devices, as implemented in the iPhone, is out of the question – the smartphone will need to be connected via a USB cable.
The DeviceAsWebcam feature will allow the computer to identify the connected smartphone or tablet as a UVC USB video device. This is the universal standard for most webcams.
Using an Android phone as a webcam became really popular during the pandemic, but you've typically had to install a third-party app to do so. You may not have to do this in the future, though, as Google is adding support for turning Android devices into USB webcams!
— Mishaal Rahman (@MishaalRahman) February 2, 2023
When the new feature will be introduced is unknown. It will probably become part of Android 14, which will be released later this year.