Got hit with this upon upgrading from Sequoia 15.5 to 15.6. on an M1 iMac.
Second monitor running through a USB-C Thunderbolt to HDMI adapter refused to be recognized after the upgrade.
Logged in as a different user, no change
Did the system prefs->Displays->Hold Option Button-> auto-detect and it still wasn't recognized
Swapped USB-C Thunderbolt adapter to a different USB-C Thunderbolt port on the iMac, no change
Unplugged and reconnected all cables, no change
Deleted the relevant ~/Library/Preferences/ apple.windowserver...XXX file and rebooted, no change
What finally worked was to use a different USB-C Thunderbolt to HDMI adapter on the failed monitor, then the Mac suddenly recognized the monitor. After that, I swapped back to the original HDMI adapter that was not working and then "magically" the Mac was able to recognize the monitor again on the original HDMI adapter.
I have a feeling it has something to do with the USB subsystem and how the OS enumerates USB devices. I've seen this a lot with USB Printers attached to Macs where they will run fine for months/years and suddenly stop and the only way to get them recognized again is to plug them into a different USB Port.