Does this mean that NVIDIA drivers are compatible with Wayland and that NVIDIA devices no longer require X11?
The Nouveau open-source drivers are 100% compatible with Wayland. If you don't need amazing performance, they're perfectly reliable and smooth for desktop usage. It will certainly hit a brick wall when it comes to gaming, however. The proprietary drivers aren't
perfect on Wayland, but the major issues have been overcome. It's considered completely compatible with GNOME and KDE running on Wayland.
The situation with NVIDIA is complex because they're still in the middle of a massive architectural shift on Linux. I'd heard a little about it, but I actually needed to do some research because I was confused about the specifics. All I've ever known is to use Nouveau or the proprietary drivers.
NVIDIA is moving away from the old proprietary blob to their own open-source drivers, nvidia-open. With this new model, the kernel module doing the most important integration with the OS is now completely open-source. A closed-source user space module will simultaneously handle OpenGL, Vulkan, and CUDA without giving away trade secrets. The result is a transparent, future-proof driver that will work perfectly with modern kernel features like Wayland, HDR, and suspend/resume.
For the RTX 20-series (Turing) and newer, NVIDIA recommends migrating to the new nvidia-open drivers. If you have a card older than the RTX 20-series (like a GTX 1080), the proprietary driver will be the only choice for full performance.
Distros should automatically be automatically migrating to these new drivers for compatible hardware. I didn't realize it until very recently, but I think I will now migrate to the new drivers myself.