Yes, they are a DNS ad blocker. iCloud private relay is a tracking blocker, to hide your IP. Both are not compatible in general, unless the "IP tracking blocker" explicitly allows to configure nextDNS as a DNS server, which is not the case of private relay.
I guess nextDNS should list exceptions like private relay, but the list is long and it's confusing. For all intend and purposes I agree with the statement, they block ads on most devices.
They also have help articles specifically for VONs:
