After working with Microsoft for a few weeks, they sent me this yesterday:
(Updated) SPO Site Sharing will now use Azure B2B Invitation Manager
MC525663 · Published Mar 10, 2023 · Last updated Jun 30, 2023
Message Summary
Updated June 30, 2023: We have updated the rollout timeline below. Thank you for your patience.
We are updating the SharePoint Online Site Sharing backend to use Azure B2B Invitation Manager instead of the legacy SharePoint Invitation Manager.
This message is associated with Microsoft 365 Roadmap ID 117557
When this will happen:
This change will begin rolling out in late March, and complete rollout by late July (previously late June).
How this will affect your organization:
Today, sharing just the SharePoint site goes through the original SharePoint Invitation Manager which always creates guest users in your organization's directory. We are now updating this flow & experience to use the Azure B2B Invitation Manager instead. The sharing flow will remain identical to what users see today, but external recipients will now go through your organization's B2B Invitation Manager experience.
Note: This change will only impact sharing of sites. Users who share files or folders will continue to receive the same experience they have today.
What you need to do to prepare:
You may want to review your Azure B2B Invitation Manager policies.