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This means you can't pass the game around to your friends or sell it afterwards, which completely ruins the purpose of physical media imo. I mostly play PC these days so this doesn't affect me, but it's a disappointing direction for console games. At least they could've used an empty disc that has proof of ownership.
EDIT: Bethesda has confirmed that only the PC version won't include a disc. Physical versions of Xbox will include a disc. Whew.
FYI: The Xbox version will still contain a physical disc. It is just the PC versions which will not.
Not that you should preorder in the first place, but before someone cancels their Xbox preorder over the news, figured some clarification would help.