Code change:
2. <del> Flows are bidirectional exchanges of datagrams within a single QUIC connection.  These are conceptually similar to streams in the sense that they allow multiplexing of application data.  Flows are identified within a connection by a numeric value, referred to as the flow ID.  A flow ID is a 62-bit integer (0 to 2^62-1). </del> <ins> In order to allow multiple exchanges of datagrams to coexist on a given QUIC connection, HTTP datagrams contain two layers of multiplexing.  First, the QUIC DATAGRAM frame payload starts with an encoded stream identifier that associates the datagram with a given QUIC stream.  Second, datagrams carry a context identifier (see datagram-contexts) that allows multiplexing multiple datagram contexts related to a given HTTP request.  Conceptually, the first layer of multiplexing is per-hop, while the second is end-to-end. </ins> <del> Flows lack any of the ordering or reliability guarantees of streams. Beyond this, a sender SHOULD ensure that DATAGRAM frames within a single flow are transmitted in order relative to one another. </del> <ins> 2.1. </ins> <del> 3. </del> <ins> Within the scope of a given HTTP request, contexts provide an additional demultiplexing layer.  Contexts determine the encoding of datagrams, and can be used to implicitly convey metadata.  For example, contexts can be used for compression to elide some parts of the datagram: the context identifier then maps to a compression context that the receiver can use to reconstruct the elided data. Contexts are identified within the scope of a given request by a numeric value, referred to as the context ID.  A context ID is a 62-bit integer (0 to 2^62-1). While stream IDs are a per-hop concept, context IDs are an end-to-end concept.  In other words, if a datagram travels through one or more intermediaries on its way from client to server, the stream ID will most likely change from hop to hop, but the context ID will remain the same.  Context IDs are opaque to intermediaries. 2.2. </ins> Implementations of HTTP/3 that support the DATAGRAM extension MUST <del> provide a flow ID allocation service.  That service will allow applications co-located with HTTP/3 to request a unique flow ID that they can subsequently use for their own purposes.  The HTTP/3 implementation will then parse the flow ID of incoming DATAGRAM </del> <ins> provide a context ID allocation service.  That service will allow applications co-located with HTTP/3 to request a unique context ID that they can subsequently use for their own purposes.  The HTTP/3 implementation will then parse the context ID of incoming DATAGRAM </ins> frames and use it to deliver the frame to the appropriate application context. <del> Even-numbered flow IDs are client-initiated, while odd-numbered flow IDs are server-initiated.  This means that an HTTP/3 client implementation of the flow ID allocation service MUST only provide </del> <ins> Even-numbered context IDs are client-initiated, while odd-numbered context IDs are server-initiated.  This means that an HTTP/3 client implementation of the context ID allocation service MUST only provide </ins> even-numbered IDs, while a server implementation MUST only provide <del> odd-numbered IDs.  Note that, once allocated, any flow ID can be used by both client and server - only allocation carries separate namespaces to avoid requiring synchronization. </del> <ins> odd-numbered IDs.  Note that, once allocated, any context ID can be used by both client and server - only allocation carries separate namespaces to avoid requiring synchronization.  Additionally, note that the context ID namespace is tied to a given HTTP request: it is possible for the same numeral context ID to be used simultaneously in distinct requests. </ins> <del> 4. </del> <ins> 3. </ins> When used with HTTP/3, the Datagram Data field of QUIC DATAGRAM frames uses the following format (using the notation from the "Notational Conventions" section of QUIC): <del> A variable-length integer indicating the Flow ID of the datagram (see datagram-flows). </del> <ins> A variable-length integer that contains the value of the client- initiated bidirectional stream that this datagram is associated with, divided by four.  (The division by four stems from the fact that HTTP requests are sent on client-initiated bidirectional streams, and those have stream IDs that are divisible by four.) A variable-length integer indicating the context ID of the datagram (see datagram-contexts). The payload of the datagram, whose semantics are defined by individual applications.  Note that this field can be empty. Intermediaries parse the Quarter Stream ID field in order to associate the QUIC DATAGRAM frame with a stream.  If an intermediary receives a QUIC DATAGRAM frame whose payload is too short to allow parsing the Quarter Stream ID field, the intermediary MUST treat it as an HTTP/3 connection error of type H3_GENERAL_PROTOCOL_ERROR. Intermediaries MUST ignore any HTTP/3 Datagram fields after the Quarter Stream ID. Endpoints parse both the Quarter Stream ID field and the Context ID field in order to associate the QUIC DATAGRAM frame with a stream and context within that stream.  If an endpoint receives a QUIC DATAGRAM frame whose payload is too short to allow parsing the Quarter Stream ID field, the endpoint MUST treat it as an HTTP/3 connection error of type H3_GENERAL_PROTOCOL_ERROR.  If an endpoint receives a QUIC DATAGRAM frame whose payload is long enough to allow parsing the Quarter Stream ID field but too short to allow parsing the Context ID field, the endpoint MUST abruptly terminate the corresponding stream with a stream error of type H3_GENERAL_PROTOCOL_ERROR. If a DATAGRAM frame is received and its Quarter Stream ID maps to a stream that has already been closed, the receiver MUST silently drop that frame.  If a DATAGRAM frame is received and its Quarter Stream ID maps to a stream that has not yet been created, the receiver SHALL either drop that frame silently or buffer it temporarily while awaiting the creation of the corresponding stream. 4. CAPSULE allows reliably sending request-related information end-to- end, even in the presence of HTTP intermediaries. CAPSULE is an HTTP/3 Frame (as opposed to a QUIC frame) which SHALL only be sent in client-initiated bidirectional streams. Intermediaries MUST forward all received CAPSULE frames in their unmodified entirety on the same stream where it would forward DATA frames.  Intermediaries MUST NOT send any CAPSULE frames other than the ones it is forwarding. This specification of CAPSULE currently uses HTTP/3 frame type 0xffcab5.  If this document is approved, a lower number will be requested from IANA. The Type and Length fields follows the definition of HTTP/3 frames from H3.  The payload consists of: The type of this capsule. Data whose semantics depends on the Capsule Type. Endpoints which receive a Capsule with an unknown Capsule Type MUST silently drop that Capsule.  Intermediaries MUST forward Capsules, even if they do not know the Capsule Type or cannot parse the Capsule Data. 4.1. The REGISTER_DATAGRAM_CONTEXT capsule (type=0x00) allows an endpoint to inform its peer of the encoding and semantics of datagrams associated with a given context ID.  Its Capsule Data field consists of: The context ID to register. A string of comma-separated key-value pairs to enable extensibility.  Keys are registered with IANA, see iana-keys. The ABNF for the Extension String field is as follows (using syntax from Section 3.2.6 of RFC7230): Note that these registrations are unilateral and bidirectional: the sender of the frame unilaterally defines the semantics it will apply to the datagrams it sends and receives using this context ID.  Once a context ID is registered, it can be used in both directions. Endpoints MUST NOT send DATAGRAM frames using a Context ID until they have either sent or received a REGISTER_DATAGRAM_CONTEXT Capsule with the same Context ID.  However, due to reordering, an endpoint that receives a DATAGRAM frame with an unknown Context ID MUST NOT treat it as an error, it SHALL instead drop the DATAGRAM frame silently, or buffer it temporarily while awaiting the corresponding REGISTER_DATAGRAM_CONTEXT Capsule. Endpoints MUST NOT register the same Context ID twice on the same stream.  This also applies to Context IDs that have been closed using a CLOSE_DATAGRAM_CONTEXT capsule.  Clients MUST NOT register server- initiated Context IDs and servers MUST NOT register client-initiated Context IDs.  If an endpoint receives a REGISTER_DATAGRAM_CONTEXT capsule that violates one or more of these requirements, the endpoint MUST abruptly terminate the corresponding stream with a stream error of type H3_GENERAL_PROTOCOL_ERROR. 4.2. The CLOSE_DATAGRAM_CONTEXT capsule (type=0x01) allows an endpoint to inform its peer that it will no longer send or parse received datagrams associated with a given context ID.  Its Capsule Data field consists of: The context ID to close. A string of comma-separated key-value pairs to enable extensibility, see the definition of the same field in register- capsule for details. Note that this close is unilateral and bidirectional: the sender of the frame unilaterally informs its peer of the closure.  Endpoints can use CLOSE_DATAGRAM_CONTEXT capsules to close a context that was initially registered by either themselves, or by their peer. Endpoints MAY use the CLOSE_DATAGRAM_CONTEXT capsule to immediately reject a context that was just registered using a REGISTER_DATAGRAM_CONTEXT capsule if they find its Extension String to be unacceptable. After an endpoint has either sent or received a CLOSE_DATAGRAM_CONTEXT frame, it MUST NOT send any DATAGRAM frames with that Context ID.  However, due to reordering, an endpoint that receives a DATAGRAM frame with a closed Context ID MUST NOT treat it as an error, it SHALL instead drop the DATAGRAM frame silently. Endpoints MUST NOT close a Context ID that was not previously registered.  Endpoints MUST NOT close a Context ID that has already been closed.  If an endpoint receives a CLOSE_DATAGRAM_CONTEXT capsule that violates one or more of these requirements, the endpoint MUST abruptly terminate the corresponding stream with a stream error of type H3_GENERAL_PROTOCOL_ERROR. 4.3. The DATAGRAM capsule (type=0x02) allows an endpoint to send a datagram frame over an HTTP stream.  This is particularly useful when using a version of HTTP that does not support QUIC DATAGRAM frames. Its Capsule Data field consists of: A variable-length integer indicating the context ID of the datagram (see datagram-contexts). </ins> The payload of the datagram, whose semantics are defined by individual applications.  Note that this field can be empty. <del> Endpoints MUST treat receipt of a DATAGRAM frame whose payload is too short to parse the flow ID as an HTTP/3 connection error of type H3_GENERAL_PROTOCOL_ERROR. </del> <ins> Datagrams sent using the DATAGRAM Capsule have the exact same semantics as datagrams sent in QUIC DATAGRAM frames. </ins> 5.

Related discussion:
text: To me it seems like header is sufficient, because the context IDs are end-to-end, and should not affect intermediaries, making the header a natural place to put it. I think having the context ID be the default behavior and the header is to opt-out is the right decision if we were to allow removing it.
This is a bit of a bike-shed, but why would it default to having context-IDs instead of not having them?
I think the second option "Negotiate the presence of context IDs using an HTTP header" is the best personally. In terms of: "Context IDs would still be mandatory to implement on servers because the client might send that header", I assume server in this context is the final application server, not a proxy? Even so, I'd argue it's applications which decide if they need this functionality, so if a server only implemented one application and it didn't use Context-IDs, then I don't see why it would need to implement it.
Ian, in your comment, are you talking about an intermediary when you say "proxy"? If so, then an intermediary need not implement anything based on the payload of than H3 DATAGRAM, it only has to pass the data along. That may be worth a clarification.
Having context ID optional has a nice future-proof property - other uses of datagrams in HTTP/3 can decide if they want the second layer or not. I wouldn't even state it as application needing multiplexing or not. Other applications might find it very useful to include a second ((third, fourth, fifth) layer of frame header. I think its fine for us to state as much in this in the spec, while also defining an explicit second layer for multiplexing.
Yes, by proxy I meant intermediary. And I agree about what intermediaries need to do, I just wanted to ensure I understood what server meant when David used it above. Yup, whenever all this gets written up, we can make it clear that intermediaries can ignore much of this.
The method defines the semantics of datagrams for a particular request, thus I think the third option makes most sense.