This was way more confusing than it had to be.
TL;DR: You can lend your digital games to friends & family for 14 days, but both consoles need to connect locally to enable this…(?)
You can’t play digital games you’ve lent out during this time. I guess the point is making it similar to giving your friend a physical game cartridge.
I think that is a good thing. There are many reasons to dislike Nintendo, but they had no pressure to do this due to the lack of competition on their platform from other stores and manufacturers. 14 days is more than enough to finish most games or at least give them a try before buying.