A warning about this network being blocking encrypted DNS traffic

This waring indicates that communication to DNS server isn't encrypted as the older way even on iOS/iPadOS 14 or above.

Solving this problem is to set VPN or install a profile of encrypted DNS to each device.

VPN and this profile cannot use at the same time because they are exclusive.
So you don't have to install this profile when VPN is set.

In addition, this warning sometimes doesn't be displayed after restarting a device, which doesn't mean this problem is fixed because network settings are temporary under update.

The points of installing an encrypted DNS profile

An encrypted DNS profile is available on iOS/iPadOS 14 or above (and macOS Big Sur 11 or above).
When ISP you usually use doesn't offer you encrypted DNS service, you can use public DNS service like Google or Cloudflare by setting "DNS over HTTPS" (DoH) or "DNS over TLS" (DoT).

You can also download an encrypted DNS profile on the Internet, but it is strongly recommanded you check its source code before installation.
If its source code is maliciously falsified, all information about your access is easily spied on and you might be forced to access fraudulent sites against your intention.

The necessary settings for using Google or Cloudflare public DNS with DoH or DoT are as follows:

[Reference]
When the warning is still displayed after installing the profile, you can try to reset network settings on the device to erase remaining network histories.
Once network setting is reset, the device name you set before is also reset to default.