Jarrad Davis gave the Lions his best. It just wasn't good enough, from the Lions brass perspective. It's not surprising that Davis will be released.
With Davis being a vested veteran, he's not subject to the waiver claim process. This gives Davis the opportunity to choose where he wants to play, if he gets more than one offer.
While it's possible the Lions will attempt to sign Davis to the Practice Squad, if he doesn't get an offer from another team that he likes, my gut feeling is the two parties will be going in different directions.