Item status "Digital books cannot be featured in ads" simply means you cannot advertise ebooks anymore using shopping ads.
On 18th May 2021, Google Merchant Center introduced a policy which disallowed shop owners from advertising any kind of digital books on Google Shopping ads.
Digital Products affected with this policy include PDFs, MOBI and Epub Books. Physical books and audiobooks are not affected the policy.
If you have published your products on Google Merchant Center then you will receive an alert message informing you of Drop in Number of Active Items in your Merchant Center Account. This is because of disapproval of ebooks.
You can request for a review if your items are not eBooks but were disapproved because they were considered to be ebooks.
The likely reasons for the implementation of this policy is to bring to an end book piracy.