Minecraft Java Edition has always functioned pretty much the same way since Mojang's acquisition by Microsoft. Bedrock Edition came along to integrate with the Microsoft account system, but Java has been on its own little Mojang account island - until now. Java Edition will soon require you to have an Microsoft account to play. However, you'll still get the free cape.
In the early 2021s, you will be required to move your Java or Mojang account to the Microsoft account system. Mojang states that this is to introduce two-factor authentication for increased security, though it'll also result in improved parental control including chat and invitation block, and account integration between Minecraft and Minecraft Dungeons.
As for Minecraft mods and PvP, Mojang affirms that nothing will change. Java and Bedrock will remain entirely separate games. While you can still use your Java username, you'll have to change your account name if you create a Microsoft account. If you already have an existing Microsoft account in the first place, you'll be able to join your Minecraft sign-in immediately.
Mojang is offering the cape, which was once the most sought-after Java Edition item: to make the transition easier. Participating in the migration will get you a free cape. Although it doesn't come with the Minecon exclusive designs, it will let everyone feel a bit royal.
Although nothing immediate is changing however, players have some concerns, including that Microsoft's more stringent terms of service could cause bans to become more frequent, locking certain players out of access to Minecraft.
More details are available in the official announcement and FAQ. Minecraft Skins 'll see how it turns out in 2021, in the beginning of the year.