Stops the player using something that another character is holding. Characters are not subject to this check, and neither are objects that nobody is holding or that Bilbo himself is holding (directly or inside something he carries).

If object A is held by a living character, and Bilbo is visible, the game says, for example, 'gandalf is carrying the curious map.' and returns with Z reset: the action is not allowed. But if Bilbo is invisible - wearing the ring clears bit 7 of his flags - the check is skipped, and he can take things straight out of other characters' hands.