My Valheim server responds with 'Incompatible Version'
When this happens, you need to launch a Steam Update for your server. This can be done with one-click using the Steam Updater in the control panel, as pictured below:
Servers do not automatically update like games in your PC's Steam library and must be updated by the customer simply by launching the updater in the control panel.
Once you click on that, it will ask for confirmation. Once you confirm it will download the update and restart the server.