The work-in-progress domain limit page, showing Media Policy and Follows Policy options. There's a little dropdown you can click that explains what each option in the policy does. For example, for media policy the explainer says:
No limit
Media will be processed as normal.
Mark sensitive
Media will be processed as normal.
However, all post attachments from the limited domain will be marked sensitive.
Reject
No media from the limited domain will be downloaded, processed, or stored.
This includes emoji, avatars, headers, and media attachments.
Posts will contain a link to view attached media on the remote instance.