How do I connect my iMac in target mode to a new MacBook Neo?

That setup is no longer supported by Apple. The old iMac cannot be used as a monitor for any of the newest Macs and Target Display mode is no longer a feature of macOS, having been deprecated years ago. Apple killed target display mode hardware when the first Retina Macs were released in 2014 and the feature died in software with the release of macOS 11 Big Sur.

Please see: Use your iMac as a display with target display mode - Apple Support

Per the link above:

• Only certain older iMac models, introduced between 2009 and mid-2014, could be used as target displays and required either a Thunderbolt or Mini DisplayPort cable.
• The intended target iMac must be running macOS 10.13 High Sierra or earlier; it does not work with macOS 10.14 Mojave or later, or with Boot Camp and Windows.
• Retina display iMacs won’t work as target displays.
• In all cases the source Mac that you're connecting FROM must have been introduced in 2019 or earlier and have macOS 10.15 Catalina or earlier installed.

Please also see: Using an iMac As A Monitor (Thank you, John Galt)

The Mac can be booted into Target Disk Mode for use as an external drive by following this Apple Guidance: Transfer files between two Mac computers using target disk mode - Apple Support

Target Display mode is not supported in the MacBook Neo or any Apple silicon Mac.

The iMac being used also needs to be running macOS High Sierra or earlier, but it's moot when the MacBook Neo, can't actually connect to it anyway.

click here ➜ Use iMac as a display with target display mode - Apple Support

Requirements for the iMac used as a display

• Any iMac introduced in 2011, 2012, 2013, or mid 2014 using macOS High Sierra 10.13.6 or earlier. When using these iMac models as a display, the cable connecting the two Mac computers must be a Thunderbolt or Thunderbolt 2 cable.
• Any 24-inch or 27-inch iMac model introduced in 2009 or 2010 using macOS High Sierra 10.13.6 or earlier. When using these iMac models as a display, the cable connecting the two Mac computers must be a Mini DisplayPort cable.

As the others have pointed out, Apple added restrictions such thst no current Mac can use any iMac as a Target Display.

Even if they had not done that, it sounds like your iMac is one that would require Thunderbolt input. Meaning that you would need $80+ in specialized Thunderbolt connection hardware just to make a connection that in and of itself, would not be enough to make things work.

Finslly, it sounds like you were putting your Mac into Target Disk Mode, not Target Display Mode. You do not start up in Target Display Mode - you put an iMac into it after starting up. And the USB symbol would make no sense for Target Display Mode as you cannot feed in video over a USB port.

If by any chance, you were trying to put the old iMac into Target Disk Mode, using that is harder now, too.

Apple added a restriction that if either Mac is running Big Sur or later - which your MscBook Neo is - the connection must be a Thunderbolt one. If, as I suspect, your iMac is new enough to support Thunderbolt, but old enough to support one of the old versions that live on the Mini DisplayPort connector, you’d need $80+ in specialized Thunderbolt connection hardware to make a working Target Disk Mode connection.

Which suggests that it might be more cost-effective to put the $80+ towards the purchase of an external USB hard drive or SSD that you could use to ferry data between the Macs, and repurpose for use with the new Mac afterwards.