Fyi, circling back to confirm that the update to make this clearer in the product was completed about a month ago! Thanks to @JQ105 's question and feedback here, we've changed the wording in the Authentication dropdown from the too-generic Auth0 to Auth0 Client Credentials with a notice that points to the relevant docs, and even suggests using the OAuth 2.0 option instead for use cases outside of the client credential flow.
So when you are configuring a resource and select this Authentication type, you will see this more helpful guidance in the product itself:
Thanks again to all of you for sharing these questions and feedback!