From the game's encyclopedia
The Children of two closely related Characters risk being born with a Congenital defect, the most serious of which is the Inbred Trait.
This is rare in the first generation, but successive Inbreeding increases the risk.
Generations of Inbreeding can, however, also result in the beneficial Pure-blooded Trait, which (if both parents share it) makes offspring immune to birth defects due to all flaws having been Bred out of the bloodline.
The game's text for patch 1.20.1.2. Words in blue are entries of the encyclopedia: hover one to read it, as in the game.
Inbreeding is an entry of Crusader Kings III's in-game encyclopedia. The game explains it: "The Children of two closely related Characters risk being born with a Congenital defect, the most serious of which is the Inbred Trait." The game also links it as Inbred. Patch 1.20.1.2, from game/common/game_concepts/00_game_concepts.txt and game/localization/english/game_concepts_l_english.yml.
Source: game/common/game_concepts/00_game_concepts.txt, game/localization/english/game_concepts_l_english.yml and the English localisation, Crusader Kings III 1.20.1.2.