You can create a custom event that fires when someone plays a YouTube video that’s embedded on your website.
To do this, you’ll need to use Google Tag Manager to manage your pixel. This is possible because Google owns both GTM and YouTube.
Google Tag Manager has a trigger type for YouTube Video. You can then have it capture at the start, completion, or at specific stages of progress (by percentage or watch time).
When you create the tag, you’ll need to name the event and can pass parameters. You don’t need to, but you could pass the name of the video and the amount of that video watched.
You can then use this custom event for reporting, The Performance Goal is chosen within the ad set and determines optimization and delivery. How you optimize impacts who sees your ad. Meta will show your ad to people most likely to perform your desired action. More, and even targeting. I use it for reporting, since it gives me a better idea of the level of engagement that my ads are driving.
But you could theoretically use it for targeting and create ads for people based on the specific video they watched on your website — a lot like how you might use website remarketing.