It means you are on the old classic Git Proxy that helped establish connectivity from the Databricks Control Plane to your on-prem Git Server. If your Git Server was cloud-based you would not need the proxy cluster.

That being said, the new way is this: https://docs.databricks.com/aws/en/repos/serverless-private-git

The Why Use section illustrates why.

Why use Serverless Private Git?

Compared to Git server proxy, Serverless Private Git offers the following advantages:

• Serverless Private Git acquires serverless compute only when it receives a Git request, and it can be inactive when not in use. In contrast, the Git proxy requires the proxy cluster to be active when the user submits a Git request.
• Serverless Private Git uses PrivateLink to securely connect to the private Git instance.