Both work. The notice is a suggestion rather than a requirement, and Add Embed stays available while it is showing. It appears as soon as the box contains a YouTube or Vimeo link, and it is offering you the more durable of the two options.
What each one gives you
An embed points at the video where it already lives. Nothing is copied to UNI. The video plays through YouTube's or Vimeo's own player inside your project page, and it keeps playing for exactly as long as it exists there.
An upload puts the file on UNI. It plays in our own player, and it goes on playing whatever later happens to your YouTube or Vimeo copy.
The differences that matter in practice:
- If the source disappears, so does an embed. Deleting the video from YouTube, making it private, or having it taken down leaves a dead frame on your project page. This is the most common way an older project quietly loses its video.
- An upload spends a slot from your daily video allowance. An embed spends nothing. See Video uploads: daily limits, length and format.
- An upload has to be processed before it plays, which takes time and can fail. See What the video statuses mean, and what to do when one fails.
- An upload loads faster for visitors, because it is delivered the same way the rest of your project's media is.
What the button actually does
Selecting Upload video instead closes the embed window and opens your computer's file picker straight away. It does not fetch anything from the link you pasted, so you need the video file itself on the machine you are working on. If you do not have it there, close the picker and paste the link again.
Choosing between them
Upload when the video was made for this project and the file is to hand. Embed when the video lives somewhere you control and intend to keep, or when it is not yours to upload in the first place.