Which means it's not truly OSS. But I dont think its insidious for software to have good proprietary features that make the tool better.
It means that there is a truly OSS core VS Code (presumably what Gitlab and Code Sandbox uses), and proprietary extensions on top that Microsoft ship in their default (proprietary) distribution
If someone is a purist and wants to use it to avoid lock-in - it is available at https://github.com/VSCodium/vscodium